Update: Digg CEO Jay Adelson is calling this post “completely inaccurate.” Lets see how this plays out…My source, which as I said is very, very good, sticks with the story. Digg may have had an angry Microsoft and Google on its hands this morning after this post, leading Jay to comment on this where they usually wouldn’t. Jay certainly wouldn’t say anything untrue in his post, but there’s a lot he isn’t saying in that post, too. See here and here for more thoughts on this.
User-generated news site Digg has been working with influential investment bank Allen & Co. (the ones that recently got Slide a half billion dollar valuation) for a few months now, and pitching big tech and media companies on a sale.
And despite a number of false starts, this time a sale looks like it might actually happen, and soon. We hear from a source very close to the deal that four companies are in heavy due diligence with Digg – two media/news companies, and two big Internet companies – Google and Microsoft. And Google and Microsoft are on the verge of making their bids.
Digg is prepared to take less than the $300 million Allen & Co. were floating late last year. Google, our source says, will likely bid $200-$225 million, which Digg would likely accept.
Microsoft is looking at a somewhat lower price. That makes sense, since most of Digg’s revenue today comes from a three year advertising deal that Digg signed with Microsoft last year. That deal has revenue guarantees – and Microsoft may be hesitant to value Digg based on revenue that they supply.
Any sale is likely to give Microsoft an option to terminate that advertising deal, which means Google isn’t valuing Digg based on revenue, either. But it is a big slap in the face to Microsoft to steal Digg away, and Google can certainly generate revenue on all those page views.
More as this develops, but we may be looking at a bidding war between Microsoft and Google over Digg. Plus any late comers to the table.
Digg was founded in late 2004 and has raised $11.3 million in funding.
I’d like to see microsoft get them, much to many digg users dismay. I really don’t want to see google run the internet, the already have a very strong grasp on search I don’t want to see that extend to social news. I’d much rather have a very competitive social news market where innovation can lead to market leaders
At last I am happy that Digg will be in the hands of more serious people. Kevin Rose has made fun of Digg and we Diggers.
Maybe Google can get them. It is a fast growing company and it is more promissing. I got this idea from the my friends on blackcentury.c om, which is a niche dating service for whites and blacks. They discussed this on their forums and blogs.
smart decision on kevin’s part to sell;
only then he’ll be considered a dot com success once he successfully cashes out
I’d rather see Microsoft doing the deal. Then going for yahoo, facebook, linkedin, technorati, popurls and the interwebs is theirs, again.
I’m in two minds here – If Google buys them we don’t get to see those annoying flash and animated ads served from Microsoft anymore.
But then Google and Doublelclick are just closing in so the ads may be back anyway.
In either case, the users will install Adblock! So it doesn’t really matter who buys them.
Arrington – I love this blog, but I can’t stand when you attribute things like this “We hear from a source very close to the deal…”
To me that sounds like: You heard from your roomates, cousin who works at a video store with Kevin Rose’s ex-girlfriend.
Again: I think you rock, but considering the false starts in the past — how am I supposed to approach this post?
Is it just me or has it always been Google vs. Microsoft? Microsoft and Yahoo! are always bunched together while Google and Apple on the other side. Maybe its just me.
There has not been any new features or upgrades on Digg for ages, which would signal that the owner is getting bored with the site – a sure sign that it’s time to sell.
The timing isn’t the best for optimal cashing-out valuation though.
How much growth do you think Digg has.. I mean it’s quite operable in it’s simple and easy-to-use manner. Does it really need an Internet giant to further it along?
Id like to know where any of this advertising revenue actually comes from. If you’ve ever been to digg you know the ads served are atrocious and ive seen several posts slamming the ads make it to the front page. who clicks that shit?
Great job on Charlie Rose. Just watched the interview. Well done.
it looks like a 1 trick pony and as soon as you buy it for the value you will lose most of the staff as they follow rose to what ever he does next. Prowce isn’t going to be another digg.
When Federated Media was running the ads on digg it was CPM, so the CTR wasn’t that important as long as there were enough advertisers lined up. I’m not sure if this is how it still works with microsoft.
At a 20x buyout price I’m sure the VC’s (not sure who backed them) are looking quiet happily at this.
Digidave – I hear you. The language is sort of code to say what kind of source it is and nothing more, and i agree it sounds lame. As to the likelihood of the story being true, it depends on the source. In this case it is a very good source indeed, with direct knowledge. Of course, a source could always be lying, too.
I think the key thing here is that there is interest from google and microsoft, and it seems likely one of them will place a bid shortly. Things will go from there.
Lots of consolidation going on.
Good to see. Seems like a solid buy for whoever gets Digg. Maybe a little unwieldy, but will pay off.
Nice job on Charlie Rose, Michael.
I enjoyed your coverage of the top tech issues globally.
Great show.
Peter Harrington – I believe the Digg/MS deal is a guaranteed CPM based on page views, but this was never confirmed by the company as far as I know. It would be consistent with other deals, like Google/Myspace.
Darren – it may be a one trick pony, but it’s one hell of a trick.
what will happen to diggnation! rose cant live without those stuff!
Good for them, but Diggers will complain either way – there’s no pleasing them (or anyone else in the industry, it seems).
It would be good to know a value per real user of Digg site if that deal ever happened
Diggnation will likely keep going, since it is was on the huge traffic drivers for revision3, which kevin rose will still be apart of.
I really don’t like Kevin Rose. He’s annoying.
Perhaps Google should win
This story appears on Google’s organic SERPs within 30 minutes of debuting on Techcrunch
Hows that for high tech
Lets see how long it takes for Microsoft and Yahoo.
But ironically it is not on the news or blogsearch
Mike, I think Digg was founded in late 2004 not ‘05 no?
Michael: don’t you find this kind of interesting timing since Jim Louderback announced Google’s integration with advertising on Revision 3’s shows? If G snaps up Digg and since G and R3 have a new tangled business relationship, that gets interesting. Especially since Kevin Rose has a strong influence over at Revision3 w/ diggnation being their top downloaded show.
Although w/ Digg and MSFT in bed over the advertising on the digg.com site, will that now become adsense ads?
Would love to hear your feedback on this if possible. Big TC reader. Thanks
@Arrington
“As to the likelihood of the story being true, it depends on the source.”
Fair enough.
I’ve heard other rumors (that one of the named buying companies is definitly NOT looking at Digg). Again: You are much more of an insider – and to that end, your source is probably more hooked-in than mine. Still, considering I have no idea where yours is coming from – I have to take this post as it is, one of many posts about this topic.
It would be interesting if either giant bought Digg. I could see Google doing interesting things – but that also worries me. Digg isn’t about finding good quality information anymore. A “digg” is synonymous with “popularity.” I’d hate for Google to implement Digg in a way that gives it too much credit in filtering quality information (google news). I hope that if Google does acquire – they use it in a way that realizes the emphasis on digg is the social – and that it’s a way to share “popular” content – not quality content (Google reader).
This deal should yield some interesting results. Social news sites in their nature function best when they are independent. When its part of a bigger organisation like MS or Google, I wonder how that will affect the ‘democratization’ aspects of the site. I said the same thing when NewsVine was aquired by CNBC, but they’ve done fine. If anything, since MS or Google aren’t news organisations, there shouldnt be much conflict of interest. Hope this source is credible!
This REALLY sucks.
What we seem to be ending up with soon: Internet run by Google (and maybe Microsoft).
Internet = no more healthy competition + monopoly on user data (hello state-sponsored surveillance).
This REALLY sucks.
Stan – yeah you’re right. we have the right date in our database, i didn’t bother to look. corrected.
Its funny .. to think that microsoft might acquire digg.
The digg will be something like this ..
headline will be Digg : the cool user driven social content website
Sub headline will be : Why Digg? Its way too cool. Aside from pure entertainment it is huge resource of coolest informations. This is a VERY different and way cool innovative approach..
bury options will have option “its so uncool”
you will be able to see only top 10 way cool headlines.. For more headlines you need to download digg reader on your verified windows machine.
All content posted should not violate microsofts super cool policies.
if google gets Digg..
It will first be uncluttered.. then it will be spam freed.. then it will be moderated.. then it will release its API.. Then it will put embedded ads which a layman would never be able to differentiate..
Most of the DIGG visitors are Apple & Linux/Unix supporters :p
Microsoft should buy digg in anyway with any value and make it as their search engine. Peoples use google to search because of their cool name. Digg will be a gr8 alternative name for Microsoft. go to digg.com & search it
On a more humorous note, if either Google or Microsoft snatches them up, the search feature on digg will improve tenfold
Well digg users don’t love linux/apple but they hate Microsoft, or in other words, diggers are jealous of Microsoft.
Digg users hate everything dugg a lot! Poor Digg!
To those wondering about the attribution language used by journalists, Yes Minister is relevant as always. In this case the bit where the Minister is leaking information directly to a tame journalist and they’re debating how to attribute it.
Journo: How about “sources in the Department”?
Minister: No, I’ve been that twice already this week.
Journo: “A close friend of the Minister?”
Minister: I don’t want everyone to know it was me who told you.
Reasonable return for $11.3m in, $300m (likely more) out — near x30 in 3.x years!
If I where Google or Microsoft, I would pass unless the deal was dirt cheap, these social sites will be worthless in a short while.
>these social sites will be worthless in a short while.
yes, but not the digg brand… and the tens of millions of monthly unique users…
I feel “digg” is a strong brand name — I’ve even heard people say they use it like “plain english” (which, in the economics of new media, is quite a powerful statement)…. — still: http://www.digg.de tells me that 1 digg is worth about 11,90 EUR (including VAT)
;D nmw
MS traffics a lot with CPM ads. That works on Digg. Lots of pageviews…
Google offers CPM but their bulk is CPC. That works shit on Digg…
Gues who’d make more money out of Digg?
If I was in this business I would NEVER buy CPMs on Digg. I’d rather give it to the government… And buying clicks… What for?
I think any type of cash infusion to Digg is great. There’s a decent userbase, some great ideas for new features, just not enough manpower and money to get it down.
My question is this…what will Jay and Kevin’s involvement be if they sell? I think Jay Adelson is one of the smartest guys in the valley, and obviously Kevin’s past and current work is an attraction. Even if Digg goes “mainstream”, the site needs some personality at the top, and not just a big wig company like Microsoft.
Yeessss!!! I have been waiting for quite sometime for digg to be acquired. Kevin Rose is a true inspiration and he deserves to profit. I mean he lost his girlfriend over this. What more do you want from him?
I still can’t fathom why they want to sell. If I were Digg, I’d want to hang on to my site.
My goal in life – one of them – is to be as plugged in as Michael Arrington.
Result of much hard work I am sure.
Why sell out? It’s not good to have everything on the net run by huge corporate giants!
If Google comes out on top, I think it’s safe to say the convenient ‘add to digg’ button on IE 8 will magically disappear. haha you can’t blame em really
Kevin,
After the sale, call me. I have the next big thing. I’m sure you can figure out how to get ahold of me.
Take the money and run Kevin!