Yep, I think they do (duh look at all the thin content penalties posted here). I've edited and gotten customers after I've fixed and rewritten those $1 articles. I've seen some pretty bad junk from the marketplace that I've fixed. Lots of times, people get hit with Panda from them and they are trying to get out of it.
Note to people who want real long-term sites: you'll pay a lot more in lost traffic and editors than just paying for a good article upfront.
You have absolutely NO CLUE what you are talking about as far as penalties go. IN NO WAY can google tell the difference between your $100 article and my $.02 one WITH THEIR ALGORITHM. Myself and MANY others know this to be 100% true because we've tested it over and over again. AND we are still profiting very well today from what you call "junk". Not to mention that if you dig deep enough into the subject you'll soon see that the amount of computations needed to accomplish what you and many others "think" they already do is laughable. They are NOWHERE EVEN CLOSE to being able to do that and won't be for a LONG LONG TIME.
This case mentioned by the OP, like just about every other one, will be the result of a manual review after "X" amount of complaints. The guy has been ranking #1 he said. I GUARANTEE that one or more competitors repeatedly complained about his sites until they actually looked at it. Maybe more than one review took place even depending on the niche and popularity of it. Obviously he didn't pass the test.
The point here isn't to say that content is meaningless. Of course it's meaningful. But it really only plays two distinct roles:
1. If you want to build mailing lists for future offers or info, or a devoted audience that repeatedly returns to your site, OBVIOUSLY you're going to need quality useful content. You may or may not want new content added regularly. All depends what the overall marketing strategy is. Content is for the visitors IF you want them to stick around and read, and bookmark your site, and come back to visit again, etc.
2. But the idea that you ALWAYS need great content is completely laughable. If your real purpose is to get someone to click on a link (other than adsense because those are continuously reviewed), then the content ONLY serves the purpose of onsite SEO from the viewpoint of google's algo. One can make an argument that better content "may" increase CTR. I've not seen that all. In fact usually just the opposite. I routinely get 35%+ CTR on sites with useless content. Some sites it's MUCH higher than that too.
It is true IMO that the more competitive the KWDS/Niche, the less you can get away with spun or shitty content. BUT it's NOT because of the algo. It's 100% because of manual reviews. As for the current so called rash of thin content penalties, my opinion is that it's just google rolling out a bunch that they've already completed. My bet is that they release them in batches and it's just that time.
Regardless though of how competitive a niche may be, Content is STILL not king. For the NY Times bestseller list? YES. For ogranic Serps. HELL NO.
LINKS LINKS and LINKS are King, Queen, Prince, Princess and the rest of the whole Fam Damily.
It has been that way for a LONG time and it won't be changing anytime soon. Go research the level of math needed for a computer to TRULY analyze content and you'll soon figure it out. Or don't. As far as I'm concerned, I'm happy as can be that so many competitors of mine waste all kinds of time trying to create great content. I build 5 or 10 sites to their one (if not higher).
The people who routinely get on their soapbox to scream about how "CONTENT IS KING" always remind me of the great proverb:
~ Those Who Say Something Can Not Be Done, Should Not Interrupt Those Who Are Doing It ~
