What's scary about that is that your advertisers' perception seems to be hurting your business, but for something that (by all reasonable imagination on my side...) shouldn't actually be true.

I'd love to see if we can help debunk your advertisers' fears.

Yes, that is the problem. However, I know that at least one of them was penalized for using TextLinkAds and stopped advertising with us because they decided to adopt a scorched earth policy in an attempt to have manual penalties removed. They simply tried to remove all possible links to themselves that they had paid for.

I'm afraid the issue is not as black and white as I'd like it to be.

I do not believe that Google would intentionally punish sites for buying legitimate advertising.

That's scary. Do Google really penalise companies who buy advertising from other sites other than via Google Adsense?

You can't make a connection direct enough, but well, yeah, that happened and happens all the time. Penguin update is all about that. They may be sincerely thinking that penguin stops direct link buying so that you have better results or more natural results. The outcome is that shitty results are still all over the place, good content is not king and if you want to advertise without any risk you go through Adsense. That is particularly true in smaller markets where Adsense is the only possible player unless you're big enough to have different deals with classic media agencies (those who manage all kind of ads -- print, tv and web.

For the sanctity of the business world we live in I sure as heck hope it's not true.