This is my first post in a long time on my often neglected blog and I thought I should come back by answering a question a lot of people have been asking on the SEO forums and sites recently, "is Google removing free directories from it's index?" Barry Schwartz highlighted the issue over on Search Engine Round Table and claimed that over 50% of the directory sites he checked had been de-indexed. Search News Central followed that up with a test of over 400 directories and found that just over 1% had been de-indexed. I used to use a lot of free directory submissions when I was starting out and built up quite a list of directories that I knew were good for a link, would show up on Google and were regularly crawled. I checked this list of just under 200 directories to see if any had been deindexed and the results were... underwhelming. Out of 191 sites 2 were no longer online so had been de-indexed, 4 were still active but had been de-indexed due to server errors or just plain crap coding or set up and 1 had only the home page indexed. The rest were fine. So in short the answer to the question above is... no.
It may be that after the Penguin update that these free directories are no longer passing as much or any link juice as before, it may be that these sites are fine. As I said earlier this list is a hand-crafted list of free directories that have been proven to work pre-Penguin, post-Panda and long before that. So is Google removing quality free directories? No, but it might be removing the crap ones and about time too.