Digg Does The Acquisition Dance With News Corp.

I could see 20 million visitors a month because of a hyper active userbase. But 20 million uniques is impossible because that would imply they have entered the mainstream in a major major way. I can’t see there being 20 million unique users in the tech industry in the english speaking world… Let alone all of them reading digg.

I think digg is huge, and has a lot of momentum but to justify that kind of valuation I think they need to break into the non tech crowd then the sky is the limit.

We’re in a bubble…

Dude, How in the hell do you manage to scoop all of these stories? Incredible.

It is ONLY a matter of time before Digg gets Acquire…they are the last remaining of the * Innovative Foursome* that changed the modern Web

Craiglist
MySpace
YouTube

>I could see 20 million visitors a month because of a hyper active userbase. >But 20 million uniques is impossible because that would imply they have >entered the mainstream in a major major way. I can’t see there being 20 >million unique users in the tech industry in the english speaking world… Let >alone all of them reading digg.

Actually, people who read digg doesn’t have to be related to the tech industry. I know several people, who know nothing about computers, and they read digg on a daily basis for sports, videos, political news. My friends even go on digg for the videos that are submitted.

Maybe not 20 million uniques a month, I can see at least 10 million uniques a month.

Compete, (www.compete.com), is showing US uniques at over 2.26 million with a nice spike in the last month.

You can see it at our free Snapshot service (just launched today): http://snapshot.compete.com/digg.com/

Disclosure: Compete is my Employer

I do not believe that Digg is the last company yet to be acquired who has been an innovator, but it definitely seems that they should strike while the iron is still hot.

While they do have the obvious possibility of further expanding their offering to the non-tech world, it seems like a deplicatable site that could recreated by any of the big boys. I have found several open source versions, and I am not sure what would stop a yahoo or a google from simply adding Digg features to their existing offering.

I might have missed it, did Craiglist get acquired? (other than the piece sold by a former employee to eBay)

So then, how much is Slashdot worth based on this hype?

Oh, and to the idiot that think Digg is a pillar of the modern web…. wow… just wow.

1 to 2 mm uniques and change sounds about right - which ranks it outside the top 100 news sites on the net. Combine that with the fact that they really have no unique technology (netscape and searchmob pretty put up the same site over night) and no real revenue, and $150 mm seems a bit high. Rupert probably can’t help but chuckle remember the pointcast history as the news corp./ digg negotiations go on….

Wow, if 20 million visitors is true - that’s a lot - the entire population of Australia.

“It is ONLY a matter of time before Digg gets Acquire…they are the last remaining of the * Innovative Foursome* that changed the modern Web

Craiglist
MySpace
YouTube ”

Craigslist???? Are you out of your mind? Myspace….an innovator?

Why the hell do they need more funding?

How can they not be making a profit with the traffic they get?

What’s the ‘barrier to entry’ to creating somehting Digg-like? If the ‘competent’ folks at Netscape/AOL can copy it what’s to stop others..

SeaWeeb..i’ll have whatever you’re smokin if you think Digg and Myspace are innovative. As for CL, it started out as a mailing list and grew to it’s online form over ‘years’ of effort. The only reason it is so austere and hasnt been bought out is that Craig never had ambitions to cash out. Although it is the first to successfully develop community without of lot hype.

Lastly, YouTube is innovative not because of ‘community’ as others would believe but bcause they developed a ‘better mousetrap’ using existing tools to serve up immdiate gratification–somehting Google failed to accomplish despite their intellectual horsepower and fat piggy bank.

Unstoppable growth, best news site around and most fresh brains of the Silicon Valley. This would be a perfect fit for the new media empire of News Corp, hope to see this acquisition really taking place.

Netscape and Newsvine showed that Digg has a natural “Aspirin” barrier to entry and I think it deserves even much more than $150M.

You spelt “source” wrong.. Sorry it was just really irritating me.

“This would be a perfect fit for the new media empire of News Corp”

I don’t think News Corp is interested in paying $150M for a million or so geek visitors, they wouldn’t know what to do with them for a start..

I suspect they’ll just make a myspace digg-clone targeted at the other 99% of the population. It would dwarf digg overnight.

Why do you think Comscore is significantly under-reporting Digg’s numbers yet you rely on Comscore for reliable numbers for all other sites? Digg’s users are 100% tech geeks, which is a terrible market for advertising, which makes Digg significantly worth less than $150M.

Digg’s users are 100% tech geeks, which is a terrible market for advertising,

And Slashdot’s are what ? 98% tech geeks ?

News Corp would be a disaster and they would lose their entire original base of users if they sold to them.

Now *this* is a stretch. I wouldn’t value Digg any more than Flickr or Delicious (ie, $20-50m). Facebook at $1.5b is a better buy.

Definitely not the time to sell. Give it another year guys.

@21: pwb says
“I wouldn’t value Digg any more than Flickr or Delicious (ie, $20-50m). Facebook at $1.5b is a better buy.”

Are you kidding, I wonder your arguments for this..

Facebook at $1.5b is a better buy cause it’s a marketers wet dream. Peoples info all over the place, trends, likes, dislikes, etc. (MySpace is infiltrated with garbage, fake accounts, and more)

Digg = people clicking boxes for stories/comments they like. Marketers don’t really care about that since most of the stories are predictable.

Hence why Facebook is worth the money.

“One point of controversy was around Digg’s claim of 20 million unique monthly visitors and steep monthly growth, whereas the Comscore’s most recent September report shows only 1.3 million monthly unique visitors and flat growth since April (see chart below).”

Is it *that* hard to understand that Comscore reports US numbers only, and that there the United States, as important as it is, is but one of about 200 countries in the world?

Comparing 20 million to 1.3 million in the same context, and claiming “controversy” is like saying “One point of controversy was around Babe Ruth’s claim that he hit 60 home runs, when the Tigers report that he only hit 2 home runs in Tiger’s stadium.”

THEY ARE TWO DIFFERENT NUMBERS. Why compare them at all? To do so is misleading at best; irresponsible at worst.

“I have found several open source versions, and I am not sure what would stop a yahoo or a google from simply adding Digg features to their existing offering.”

LOL, so ture. I was bored over the weekend, so in about 2 hours, I created this: http://www.lexroll.com

If I can do it, I bet google or yahoo can do it a million times better

I can’t help thinking these big corporations are shooting themselves in the leg when they’re trying to keep up with the buzz. The surfers today are mobile - this day they’re interested in one service and tomorrow it’s something else. I think there’s not much of brand faithfulness here, users go where the best service is and the blogs are spreading the information fast.

On the other side, this way the continuity of these services is secured (at least more than without acquisition). I think in YouTube’s case it’s a good thing. I can’t find any big value in Digg, though - maybe it’s because I’m not using it that regularly anymore to find stuff to read.

Vik,

Did you make that site just from the SourceForge source?
Pretty impressive for 2 hours!

If news corp cant buy digg than these are the most likey player to buy digg.

http://vashistvishal.blogspot......uyers.html

Vishal: there are only these players on the pitch, and you say these are the most likely players.. C’mon.. Why would Yahoo! buy Digg, they don’t need any more traffic, they’re already no 1. But they just got sure that their new media kingdom dream lost against Google’s tech-intensive approach, that’s why they’re buying more tech and money making internet-ads companies. Google goes more media, Yahoo goes more techy.

Grrr I hope NewsCorp don’t buy it and turn it into a piece of garbage like they did with MySpace

I’m not suprised they didn’t get the deal , it is run by a bunch of crooks and control freaks, its not really a user driven community, it is more like run bye dicator editors and power hungry top diggers all kevins freinds. I hope reddit kicks there arse they are a true user driven site, anyway my two cents. you diggers can get lost

I heard Mark Curban was interested in buying digg, anybody else here that? Nice one Vik i didn’t know it was that easy to do

Jeff, this is not a matter of loving or hating Digg. I love reddit too, but all in all Digg is very very successful, and now even mainstream users also becoming a part of their userbase. Having geekish userbase is a very good signal for the future; don’t expect to have mainstream userbase just from the beginning, this is not web 1.0 anymore, markets are not so wide now and there’s high competition.

jeff yes digg is controled by editors and reddit will probably beat them in the end, but do you have to be so mean

Digg is a pyramid scheme for information. 150 million dollars?
For a so-called news link site that includes a “spy” feature where you can watch the top 50 users in real time digging submissions at the rate of one per second?
150 million for that?
I don’t see that happening now or in the future.

I read 5-8 tech blogs a day and I don’t use Digg, know how to use Digg or care to use Digg. There are probably only 300k “real” users of the website, but they come back so often that the #’s are inflated. In a way it mirrors SocNet behavior.

I’m guessing that b/c of the series B they are still not profitable? I love how a company that isn’t profitable can command 9 figures. God help us when a website comes out that is actually making a million dollar profit, what would THAT sell for?

Alaska slashdot they would probably go for 1 million, thoughs bastards they just slashdot all theirs buddys they never slashdot real decent sites. If you go to digg and slashdot you will always see the same bloody sites you would think there is only 100 websites in the whole world if you visit them, but theres millions of great sites that never get a chance. But I think reddit will save the they they list anyone that has got a good story they got a good sysytem going there. you submit a story if alot of people pres sonit bingo you on the homepage that is what i call a fair system. Newscorp have a quite look at reddit and maybe you will just find a gem amongst a bunch of stones. ok out of here, I hope this comment rocks your world people.

hey Jeff have you ever heard of spell check

I’m a busy guy i don’t have time for stuff like that

Jeff, no time for spell check, just surfing and posting comments? LOL! Reminds me of someone I know.

I don’t think News Corp cares at all about advertising to this medium.. digg can be used a huge promotional machine. You want a website to get instant notice? Get it to the top of digg. What better way to control this fact, than to control the site.

Digg is worth it, because it’s become a cornerstone of internet culture. And while it may be 100% internet geeks.. that’a alot of “geeks” and more and more “geeks” are normal people, and business owners. This site is read by the very same “geeks”

It’s definitely interesting to watch these acquisitions play out. Thanks for making it easy to be a fly on the wall!

Laura

Digg shouldn’t do this. They should hold out.

comScore numbers are “flaky” BUT they are consistent. I have tracked 000’s of sites over the past years, looking at comScore numbers, Nielsen Net Ratings, my our tracking pixels and actual logs. The comScore numbers are always off, but the discrepancy is very consistent. Based on what I’ve seen, I would estimate the actual DIGG traffic to about 4-5 million unique visitors a month. And based on that, a price of $150mm is ludicrous; there are literally thousands of sites with better traffic. But DIGG, while a great site, is really over-hyped, so the valuation inflation is thriving.

^ did you read last week’s business week on analytics and how none of the sites really pull accurate info, many factors play into what constitutes as traffic, etc? you should. it’s very insightful.

When reporting on Digg, “Comscore is notoriously flaky,” yet when it comes to CNET, Mr. Arrington is content to rely on the Comscore numbers without equivocation. Solid work.

Given that Comscore can’t even spell “source” correctly (see Graph), I doubt that their data is reliable.

150 sounds cheap. I.e., non-bubble-esque.

Can we tone down the bubble-hysteria, please? Let’s wait for actual symptoms of a bubble, rather than look for reasons there is one.

So let’s see. I run a company that’s apparently not even at break even yet that I started with a guy on eLance who got paid $10/hour. I have the opportunity to sell this and come out a millionaire. Considering that (according to BusinessWeek) my total life savings before Digg was around $10,000, it’s only obvious that I should take my chances and turn down the offer and ignore that the market is telling me it’s worth $x. I don’t see any problem letting some VC take even more equity in the company at a valuation that’s probably higher than the amount acquirers are currently willing to pay. Give us a few months and I’m confident we’ll hit break even and grow our eyeballs dramatically.

If any of this sounds absurd, that’s because it is. Could Digg grow its value and eventually get the money it’s looking for? Sure, but what’s the risk and time-cost? Why sell even more equity to a VC and possibly further drive your valuation out of the range buyers are telling you they’re willing to pay when you can walk away with a nice chunk of change? Given the recent demonstration of Digg’s vulnerabilities and the fact that it has absolutely no defensible technology, it seems like taking the money and running would be the smart move. It’s never a bad thing to get out a little early. It’s the people that fall in love with their companies and wait too long that always end up regretting it.

I’m buying Digg for whatever I can find under the couch cushions.

I agree - I lived through the last bubble. Web 2.0 doesn’t have the same feel yet, though I absolutely think a lot of companies are being overvaluated. I guess it’s the price of convenience though - acquisitions are a quick way to get what you need.

The idea of Digg is cool, but I kind of feel it’s easy to recreate and don’t really see long term potential for it, though I could be mistaken.

Honestly, I see no value in Digg as a site at all. From personal experience, I’ve really really tried to enjoy Digg. But there is absolutely no news on that entire site. At what value is a site worth, that has zero original content? I mean it’s a neat idea, that’s apparently taking off, but what is there beyond the initial novelty of the site?

A demand for 150mil minimum just shows the incredible hubris of those involved in making decisions for Digg, specifically Jay. Rejecting offers under 150mil and going for a Series B is a decision forged not by reason or logic but by ego and false pride. And what is ironic about this attitude is that it is steeped in the very worse of the web 1.0 mind set - arrogance and delusions of grandeur. And I suspect this arrogance will just bite them in ass like so many web 1.0 companies that didn’t sell while the getting was good.

My guess is Digg just fade away from this point forward as some new startup on the block will appear and sucks away all their hype - like Friendster. Digg is a house of cards and the first card has been removed.

The Comscore traffic discrepancy is so huge that either Digg or Comscore’s credibility should be at stake. Not so in this new bubbling time where nobody seems to care much about the facts, just the hype. Like YouTube, Digg offers little of substance, a lot of page views, and not much revenue. They are lucky the pockets are so deep and the rationale so thin for these megabuck deals.

Joseph - But at least YouTube has ORIGINAL user content. Independent film makers, everyday people etc. Digg provides NOTHING, only poor summaries of spammed websites.

Patricia: Web 2.0 isn’t the same type of bubble because none of these companies are hitting the public markets (thank god). They’re relying on large publicly traded companies to buy them at questionable valuations. Everybody debates what a bubble is but I think you’re probably in time of some irrational exuberance when a company that just recently was not profitable on only $3 million in revenue thinks it’s worth at least $150 million. Digg has known flaws and non-defensible technology and even with improved monetization, you can easily see that the company would need to vastly grow its userbase to even hit low 8 figures of revenue.

somaking: $150 million for a company that apparently hasn’t even turned a profit “sounds” cheap? Please leave your email address. I have a number of “investments” you might be interested in. I really applaud your long-term thinking. It’s so rare these days that we see acquirers willing to wait 10-15 years to break even on their acquisitions. You should be working in M&A.

charles: agree completely. It’s amazing how something that started with a programmer on eLance by a guy with a reported $10,000 in savings gets to this point. The fact that a company like News Corp. would even be interested in Digg given all the obvious hype and lack of substance should be a source of pride. “Look at me. I started a site for a few thousand dollars and Rupert Murdoch paid $xx million for it just a couple of years later.” I hope it works out for them because it’d be a great success story, but unfortunately given their apparent mindset, I think it’s more likely that we’ll see “I was the co-founder of Digg. At one point, we had acquisition interest from News Corp., Yahoo, Google. etc. Our new company, Dugg…”

Joseph: Comscore might not be 100% accurate, but I’d trust the third-party source over the internal data provided by a company that is trying to find a sucker that believes it’s worth $150 million. A ~19 million visitor discrepancy is obviously not within a margin of error. Somebody is way off, and if it’s Digg, how are they that far off and could it be intentional? I hope these potential acquirers do their due diligence. Perhaps they did and that’s why they weren’t willing to pony up $150 million?

I love Digg and I’m afraid if News Corp ( god of insanely advert heavy sites) buys them, what will the advertising model look like? I’m sure Kevin wouldn’t want anything to change with the ad model but don’t you think News Corp is going to have influence on it? I fear the worst.

“Digg provides NOTHING”
No, Digg provides a GREAT center of GOOD stories. I read it daily and would have to visit hundreds of webpages a day to find the stories I find on Digg. It’s a great source of stories that would regularly go unread. The summaries might be poor but thats why you read the actual story.

Let us look at these GOOD stories. Todays top on the FRONT PAGE NEWS.

Girl Addicted To Sex - A True Story (Documentary not Porn)
Classic Original: Microsoft Windows 1.0 video
How NOT to die…
CLOCK!!!
PS3 and Nintendo Wii Launch Day Camp-Out Guide
Man Smokes Pipe Through His Eyes!

WOW. I know that I am fully caught up with world news for today. Thank god, Digg was there to link me to all of these enlightening topics.

This is a comic about what kind of digging I expect should News Ltd aquire Digg:

http://www.richgentlemenhide.c.....e/?news=on

Craig #32

Cuban not interested in Digg. I asked him earlier today.

@ drama, thank you for your insight

overcast, You are a garbage collector and I am the guy who look for shiny stuff in the pile of garbage. …

impu, While you’re wasting time sifting through garbage, I’ll make money by getting rid of it.

Digg does nothing for a media firm, great ideas but so copied eleswhere and not growing much….Digg will go donw as a great pioneer but not as a financial win

Yup, it’s very easy to build a digg clone, but that is only 0.01% of the battle. Building a Digg-like community is where the real challenge lies. In my case, I had extra server space and a domain that was just sitting there. So I decided to build this for fun. I doubt many lawyers or law students will have the time or the interest to participate in this website

I read Digg, but Overcast is right. Seriously look at the stories, while interesting somewhat, most are garbage or left wing political stories.

Sadly, I still read it though for the occasional good story.

I wouldn’t pay $150MM for Digg. They are a temporary success, won’t last too long.

-Amit
http://www.ipatrons.com

I like digg… however I would say the tech crowd they attract is pretty anti-ads. Any attempt to plaster ads all over digg in order to “monetize” that user base will fail and likely cause a backlash. Putting ads all over myspace is completely different.

So either an acquisition should wait until digg broadens their scope beyond tech, or figure out a different way to become profitable, something like using the digg effect to identify buzzy news stories, and therefore helping “old media’ properties figure out what to publish or what stories to cover. Something like that I’d get excited about.

Honestly, I would compare Digg userbase level on par with Youtubes technically. I’ll probably get a lot of heat for that, but I don’t think Diggs average user is anywhere near the technical level of Slashdots. The system isn’t rocket science, and the contents of comments and discussions certainly is not at a Slashdot level.

There is a lot more to a acquisition than the stated price. If I were on the buy side of the table, I’d be happy to reward Digg for performance over several years. It seems to me they could easily get a few million with big bonuses if they meet revenue milestones over the next several years. If they’re expecting it all up front, that’s a red flag that they want to flip it and walk away from it.

If I were in the founders’ position, I’d take a deal like that. I sold my first company in 1999 for a couple million in cash and stock, went home with a million dollar check at age 28. A lot of people told me I was stupid for selling it too early. One year later, the market tanked and everything went to hell in a handbasket. I still had a million dollars in the bank while a lot of other people watched their paper gains go up in smoke. I was able to buy a house, start a second company, ride out the recession, etc in comfort with that money.

Is Digg worth 100M? I guess so if someone is willing to pay that much. But unless they have ridiculous liquidation preferences to cover, I would take a smallish deal with upside, manage that money wisely, and never have to worry about money again.

My advice to the Digg guys, if they’re reading this, is they’ll have plenty of other ideas. If you can get a deal where you’ll go home with one or two million $ apiece with future upside, take it. You can make your “vanity money” later on. And if the Next Big Thing never happens for you, you’ve got some decent money in the bank and an easy life that most people will never have.

^ on a side note brian your site looks cool.

maaaan, this is biggest comments sequence I have red. It is obviously a hot topic, there are couple of things I picked up around the comments that I want to address;
1. replica issue:
Digg is very easy to copy , it takes sourceforge search and 15 min of setup time. However, I cant believe there are still people out there that think that replication of surce code is all it takes. If we would be talking about Riya that took 15 Phd’s to develop, it would make sense but Digg C’mon.

2. what if yahoo releases something like Digg:
Yahoo or Google can do it but it won’t get as big, if they had a chance to make it big it would be long out. Being released by By big shot doesnt mean end to competition. By looking at techcrunch index we can count several small companies outperfroming big guyz in small industries. Zoho vs Google Docs for instance
3. 150 mill.:
I think Digg can pull even more cosnidering the fact that most of the miansteram users in europe have not heard about it there is lots of space for expansion.

When I spoke with Digg CEO Jay Adelson a few weeks ago, he told me the monthly UVs was 10M per month, so I’m not sure where this 20M number is coming from.

In the case study that I wrote on Digg for my blog, Startup Review, I came to the conclusion that Digg was worth $120M today. The details are in the “Exit Analysis” section of the case study (http://www.startup-review.com/blog/digg-case-study-why-techies-are-an-important-audience.php)

My main point as to why Digg has created a valuable asset, and paraphrased from the case study: “… a loyal following of techies with a penchant for blogging assures high natural search rankings – this is critical for any content-oriented site. Secondly, a community of engaged story submitters and comment contributors is a difficult thing to replicate, even for sites with a large audience. While competing sites will get better at fostering community, getting the formula correct is not an easy process. Third, Digg has begun to establish a mainstream brand. They have done a great job of fostering PR, and the longer they keep
the PR machine humming, the more defensible their brand will become. Brand is defensible.”

Clearly Digg has a long way to go to prove that the asset they have created can generate substantial revenue and profits, but isn’t that what people said about MySpace before it was acquired?

Digg’s Web 2.0 brand identity is superior to both ImageShack and Photobucket. However, if you look at the comscore graph below, and compare it to Digg’s comscore, you will notice that both ImageShack and Photobucket have traffic magnitudes greater than Digg. Presumably one could not assign valuations just by looking at raw numbers of unique visitors (IS: 33ml, PB: 20ml).

http://img58.imageshack.us/img58/3145/ispbsc9.png

“One point of controversy was around Digg’s claim of 20 million unique monthly visitors and steep monthly growth, whereas the Comscore’s most recent September report shows only 1.3 million monthly unique visitors and flat growth since April (see chart below). Comscore is notoriously flaky, and these numbers are for U.S. households only. Comscore is almost certainly significantly under-reporting Digg traffic.”

This is notoriously biased. Where are your sources? I will bet $150 million that Comscore’s numbers are a lot closer to the truth than 20M.

“I think Digg can pull even more cosnidering the fact that most of the miansteram users in europe have not heard about it there is lots of space for expansion.”

No., there isn’t. Eu