Digg

I'm not sure why other reviewers have given Digg such high ratings given there is no business model or sound underlying business concept here. As I've said before, a "cool" service or idea doesn't necessarily translate into a viable business, and Digg appears to have been working under the premise of "let's get a lot of traffic and then someone will buy us for a lot of money."<br /> <br /> With those acquisition... More >>

I'm not sure why other reviewers have given Digg such high ratings given there is no business model or sound underlying business concept here. As I've said before, a "cool" service or idea doesn't necessarily translate into a viable business, and Digg appears to have been working under the premise of "let's get a lot of traffic and then someone will buy us for a lot of money."<br /> <br /> With those acquisition opportunities gone, Digg is forced to think about the unimaginable - having a real business that makes something called money. Google was rumored to be interested in July 2008 in acquiring Digg - <a href='http://thenextweb.com/2008/07/23/google-in-negotiations-to-acquire-digg-good.'>http://thenextweb.com/2008/07/23/google-in-negotiations-to-acquire-digg-good.</a>; But that is all in the past.<br /> <br /> Digg is very reminiscent of 1999-2001 where eyeballs, hits and other non-sensical metrics were the rage. The names of the metrics have changed to the web2.0 equivalents (pageviews I guess) but the story is the same. Metrics that don't offer a direct translation into revenue or profits are being used to justify a business' viability. On a side note, I see people talking about Twitter in a few years in the same way (see my review of Twitter here - http://www.chubbybrain.com/companies/twitter/reviews/amyz)<br /> <br /> I wondered if I was alone in not understanding how Digg makes money but found at least a few other just as perplexed (one example here - http://blog.dotkam.com/2008/01/09/how-does-digg-make-money/). What is most interesting when you Google "How does Digg make money?" is that there are many more links by people who detail ways you can make money off of Digg. What this means is that other people <b>seem</b> to have figured out ways to play Digg to make money off the service. Here's one example: http://tnerd.com/2006/10/03/diggcom-how-to-make-money-from-diggcom/<br /> <br /> I'll summarize the process people can use to make money off of Digg although it is a bit more detailed in the link (caveat: the link is dated - 2006 - so Digg may have figured out ways to prevent this by now. But given the # of links talking about making money off of Digg, it seems new methods have emerged) <br /> <br /> These gamers (and that is a compliment) are essentially playing an arbitrage game. They pay a certain amount of money to get traffic to their website from Digg. Once they get these people on their site, they make more money off these visitors with the ads they host from Google Adsense. (Note: Making more than you pay for a customer is a good idea in business) <br /> <br /> Per the post, the math works like this (these numbers are unaudited):<br /> <br /> You pay a vendor to get 51 Diggs on Digg = $71 -- This translates into 10-15,000 users to the website paying this amount.<br /> This # of visitors drive approximately $4-$500 of Adsense revenue<br /> Resulting profit to website owner = $329-$429<br /> <br /> Even if advertising rates have dipped, the margins would still be quite healthy. Perhaps Digg can figure out a way to insert themselves into this transaction. Even if they were to take $100 of this, it would still leave the website owner with a healthy margin and make Digg some much needed revenue as well. This might be somewhat contrary to the 'power to the people' doctrine under which Digg was founded, but it's foolish to leave this money on the table when others are using Digg's platform to profit.<br /> <br /> Unfortunately, however, I don't see Digg making money and eventually getting acquired for less than what's been invested in them. Again, another great service with little prospects to be a real business. << Less

The idea behind Digg is to let ordinary people vote for their favorite news stories, and whichever ones receive the most votes are more prominently displayed. Think of it like a popularity contest for news articles. Of course, the biggest drawback, as is the case with most Web 2.0 sites based on user-generated content, is that what's most popular is seldom the same as what's most newsworthy. Thus, don't expect Digg to give the NY Times a run f... More >>

The idea behind Digg is to let ordinary people vote for their favorite news stories, and whichever ones receive the most votes are more prominently displayed. Think of it like a popularity contest for news articles. Of course, the biggest drawback, as is the case with most Web 2.0 sites based on user-generated content, is that what's most popular is seldom the same as what's most newsworthy. Thus, don't expect Digg to give the NY Times a run for its money anytime soon. That said, largely as a result of Digg's early success, the company now also faces an abundance of competition from the likes of Reddit, StumbleUpon, and others. Nevertheless, it remains one of the largest and most successful players in the social media space. << Less

Over the last decade the internet has brought us a wealth of information. You can go online and see what's the latest on Wall Street to what developments are coming up in a small town in India. Because so much information is converging at once place for the first time, people are trying to develop effective ways of processing all of this information into something readable. Thus we have had the emergence of algorithmic news feeds such as Google N... More >>

Over the last decade the internet has brought us a wealth of information. You can go online and see what's the latest on Wall Street to what developments are coming up in a small town in India. Because so much information is converging at once place for the first time, people are trying to develop effective ways of processing all of this information into something readable. Thus we have had the emergence of algorithmic news feeds such as Google News, and while these news sources are great, you can just tell that there is some lack of human touch, and that's where Digg comes in.<br /> <br /> The principle that Digg runs off is harnessing the power of users. Through this simple concept they have managed to create a news sources unlike any other on the internet. While the internet is far too vast for one person to sort through, having thousands of people doing it simultaneously makes it possible, and before you know it you have a completely user generated news source. From across the world, users on Digg submit stories, images, and videos on vast range of topics including science, politics, gaming, and much more. From my own personal experience, there has never been a single time on Digg where I didn't find something new and interesting. The voting function is the site's cornerstone, it's the key that ensures that the most interesting and recent stories are on the front page and come up first in their respective sections. <br /> <br /> Since the site's debut in 2004, the Digg user base has grown exponentially. According to Quantcast, Digg receives over 22 million unique visitors on a monthly basis. Sadly, unlike other industries, such sudden popularity can actually hurt you with internet companies. The bandwidth bills for Digg are growing at the same rate as its popularity, and it's currently estimated that the company's costs are running at around $14 million a year which is definitely dragging on Digg.<br /> <br /> Now normally Digg would be one of the few exceptions that I would let slide solely based on ad-revenues due to its heavy traffic, but because of one problem this isn't the case. The problem being that Digg traffic doesn't convert well into revenues, for two reasons:<br /> <br /> 1) The type of people that are on Digg tend to be more tech savy and can spot out ads easily so they don't fall for clicking on them.<br /> <br /> 2) When people go on Digg, they aren't usually looking for anything specific but are rather just seeing if anything interesting is up. Because of this the content targeted ads don't work very well unlike on say Ebay where you're looking to buy something and the ads relate to what you are looking for.<br /> <br /> A recent release of Digg financials showed that the company has been running losses for at least the last two years. While this is important, I think it is more important to take into account that the company was focusing on being acquired up until this fall. That means they were putting more effort into developing their name, user base, and popularity (which they definitely succeeded at) than into revenue generating projects. Only this fall of 2008 after getting their latest round of funding, have they shifted their focus towards becoming a profitable self-sustaining company. <br /> <br /> Without a doubt I believe the same smart and innovative people at Digg who were able to bring the site this far, will be able to come up with a way to leverage their user base to generate significant revenues. This combined with their site's unique appeal and strong venture backing, is definitely a formula for future success. <br /> << Less