My question and curiosity is about the importance of blogging in internet marketing. I came to know that guest blogging is loosing its edge after recent updates by Google. How to make the blogging important and effective for online marketing as it used to be before? 

Make blogs important to users/readers or important to google, which one?

I mean to make the blogging popular for the readers? If the readership is good, we will naturally get the benefit.

Then write for readers not search engine.
Promote your blogs using forums like Cokoye, promote it in socialnetworking sites, pay for adverts, constantly adding contents on the blog.
These get a lot of people to your blog, which will in turn increase your SE ranking naturally as Search engine sees a lot traffics going at that direction.