Digg's Demise: A Lesson in How Not To Run a Social News Site
NEWS ANALYSIS: We can't be reminded of this basic tenet of business too often: If you don't listen to your customers, you're history. In Digg's case, it also alienated them. This is not often a good business strategy.Digg, one of the first successful Internet social news-sharing sites, died a humiliating death earlier this week at the tender age of 8 by being slowly cut into pieces and sold off like a cow. We can't be reminded of this basic tenet of business too often: If you don't listen to your customers, you're history. In Digg's case, it also alienated them. This is not often a good business strategy.
Ultimately, Digg was forced to sell its engineering talent pool to the Washington Post for about $12 million, some patents to LinkedIn for another $3.5 million, and the remainder (brand rights, servers, office supplies, coffee mugs) to Betaworks on July 12 for pocket change: $500,000. Betaworks will meld Digg into its News.me site.
The company once had been valued at $164 million in 2008 following its last round of VC funding by smart investors such as Marc Andreessen, Reid Hoffman, Silicon Valley Bank and Highland Capital. Some background: Digg was a social news Website that pioneered the idea of registered users posting links to stories and voting them up or down. Digg called this practice "digging" and "burying," respectively. If a story was cited and subsequently got a lot of "diggs" (or even "burys"), then the writer of that story could count on earning a lot of traffic, and the Digg poster would earn some respect and/or notoriety. In its best days, Digg ranked with Slashdot as two of the most popular places to go to engage in social news judgment on the Web, especially among the IT community. But Digg's influence slipped markedly with the emergence of newer, broader-based social news/networking sites, such as Reddit, Twitter, Facebook and scores of others. It also didn't change enough -- and in the right ways -- in the face of new competition. According to Web analytics provider Alexa.com, Digg ranked No. 178 in traffic on May 15, 2012. Another analytics firm, Quantcast, estimated Digg's 2012 monthly U.S. unique visits at 4.4 million -- a far cry from the 20 million to 30 million it was getting four years ago, according to several Web analytics firms.