Last week I sat down with Digg founder Kevin Rose to get the Digg “State of the Union.” The company, now more than four years old, has continued to grow incredibly since launching in late 2004 and regularly innovates with new products. They are rumored to be approaching profitability after making headcount cuts earlier this year. But much of the hype around Digg is now in the past. From 2006 onwards there were regular rumors of Digg being acquired. So many, in fact, that we called on CEO Jay Adelson to “Just sell Digg already” in late 2007.

And Jay certainly tried to. They were very (so very) close to closing a deal with Google in mid 2008, but the deal fell apart at the 11th hour. Digg was quite literally left standing at the altar. And we believe that the company made the decision at that point to stop looking for buyers and to focus quietly on the core business for a long while. They raised more money late last year.

I talk to Kevin about the history of Digg for about half of the 30 minute interview. There’s a lot of good content about the early attempts to buy Digg, since it’s far enough in the past that he feels comfortable talking about it. But the forward looking stuff is easily the most interesting.

I asked Kevin if he felt that any of the numerous competitors (AOL Propeller, Yahoo Buzz, Mixx, Reddit, Hacker News) were a true threat to Digg. He shook his head no before I even finished the question (skip to the 29 minute mark), and said something surprising: “I just feel that we’re heading in a different direction than them.” When pressed for more details, he says that they’re launching a product to address the real-time threat that Twitter, Facebook and others are focused on, and that the new Digg search was the first hint of what they’re thinking of. More details soon, I’m sure.

The full transcript is below:

Michael Arrington: I’m here with Kevin Rose, the founder of Digg, Kevin Rose.

Kevin Rose: Hey.

Arrington: Thanks for inviting me to your office.

Rose: Yeah, thanks for coming out to the office.

Arrington: Yeah. I wanted to get a sort of state of the union of Digg, because the company has been around now for…

Rose: Four plus years.

Arrington: Four plus years, November 2004. So, obviously it’s grown a lot, changed a lot, and it’s clear that there’s a big focus on new products and some things that you’re doing.

Rose: Excellent.

Arrington: I want to talk about the last couple of years, what happened to the company, the good and the bad.

Rose: Sure.

Arrington: And how it’s affected your thoughts on product and things like that.

Rose: Sure.

Arrington: So, could we take a step back and I think the history of Digg is well known. You launched in November 2004, it’s a way for people to add bookmarks that they found interesting, other people Digg those bookmarks, then the best stuff goes to the top.

Rose: Right.

Arrington: That’s well known. When did the idea explode and you realized definitely it’s taken hold, it’s gone viral and the people love this? Network effect kicked in, middle of ‘05?

Rose: Yeah, middle of ‘05.

Arrington: That’s when you launched Digg 2?

Rose: Yeah, Digg two was kind of the catalyst, I think, for a lot of that stuff.

Arrington: Yeah.

Rose: I think that Digg one was just my own design and it was still a very, kind of crappy digging process. We weren’t using AJAX yet for the digging. So, you would actually Digg a story, it would take you to another page that said, “Thanks for your Digg.” And then you would have to go back to the last page you were at.

So, AJAX wasn’t big back then. I remember when we were calling it “Asynchronous JavaScript” and everyone was like… When the word AJAX came out, we were all like, “Oh, that’s different.” And then all of the sudden, everyone was using that to speed things up and to make things easier.

So, we launched that, the new design, the new big yellow buttons, kind of bring the voting aspect to the site front and center.

Arrington: And that was when, June ‘05? Or was it earlier?

Rose: Something like that. Right, that was just before Jay came on, because Jay joined the team a month or two after launching 2.0.

Arrington: Yeah.

Rose: Because I was showing… Jason Calacanis was interested in buying Digg, even at 1.0, and that’s when…

Arrington: Did he make an offer, or he was sort of floating around a million dollars?

Rose: Yeah, he made an email offer. There were never any lawyers involved or anything like that.

Arrington: On behalf of AOL, right?

Rose: No, no this is…

Arrington: Oh, he hadn’t sold to AOL yet.

Rose: Right, so he’s working with Cuban and Weblogs.com.

Arrington: Weblogs.com.

Rose: And we met for sushi in Los Angeles, and he really liked the concept. I showed him version two before we launched and he took a look at the new designs and was like, “Done.” And then a day later, I got an email from him stating that he like to fold it into the mix of sites that he was already working on and thought it was really cool.

Arrington: And was it the price that was the problem, or just him?

Rose: No, I like Jason. I think it was that the terms were really funky. He’s a smart, shrewd businessman. He was like, “Here’s a kid that doesn’t know anything” – at that time I’d never dealt with the VC community, with investors of any shape or form. He basically threw out some pretty aggressive terms.

I was kind of blown away. I was like, “Wow, I could actually make a million dollars here,” on something that I’d spent four months building.

Arrington: Yeah.

Rose: Shared that stuff with Jay, at the time, who was just kind of an advisor. And he looked at it and said, “These are crap terms, don’t do it. If this is something you’re really serious about, let’s turn it into a real business.” There already was a business, I’d created a corporation for Digg before we launched.

But, it was one of those $250 kits that you go and do online.

Arrington: Yeah.

Rose: But, yeah. Version two was only really starting to take off.

Arrington: But, you didn’t actually raise any capital until… in October of ‘05, right? Or, at least that’s when it was announced?

Rose: Well, I was basically funding the entire project out of my own bank account. I had run out of cash. We needed some more servers, and by more I mean like, server number three or something like that. I was really in a sad state of affairs as far as my savings, so it was only a few thousand dollars and I was out of money.

And at that point in time, I talked to a friend of mine, Chris, who started a company called TextAmerica. You probably don’t remember them, but they were a really big photo… You could take a photo with your cell phone, email it, and then post it online kind of a photo blog type service.

He threw in $50K, so he was our first Angel. And then, as that was happening, they gave us a little bit of breathing room, at least another month of breathing room to where we could actually sit down with some real Angels. We were in the process of moving back up to the Bay area.

And that’s when we sat down with the Angels and VC’s at the same time, to try and figure out who we wanted to work with.

Arrington: And you worked with a bunch of them, Greylock, Amidiar, Mark Hendry, Smith-Hoffman, Ron Conway – Mike Maples somehow squeezed in there. He just started a new business, right?

Rose: Mike Maples is awesome. Well, he was actually introduced to us by… He was working with Conway at the time.

Arrington: OK.

Rose: Kind of vetting deals. Conway is, of course, amazing, and Maples has turned out to be just an awesome… You know Maples, he’s just an awesome guy. I’d be honored to have him involved in anything I ever do in the future.

Arrington: So, what was the valuation that round?

Rose: That round?

Arrington: Yeah, $2.8 million you raised.

Rose: Did I raise $2.8? I don’t know. I think we had a post of like, maybe $8?

Arrington: OK.

Rose: Something like that.

Arrington: Yeah, and that was in ‘05, so it was before things started exploding.

Rose: Right.

Arrington: So, Delicious hadn’t been bought yet…

Rose: We had good grab, everyone was looking at Alexa at that time, right? And then, the grass grew up and to the right; that was something that VC’s were very into. I think one of the problems, though, I wouldn’t have gone and shopped as many venture capital’s as we did.

We went all up and down Sand Hill Road and we had term sheets from just a whole slew of different companies. Took up a lot of time. This is time when servers were falling over, things were crashing. We should have just met with two or three and just gone from there.

Arrington: And Jay was on board at that point, a CEO?

Rose: Right, so the second I actually needed some real cash, I had no idea what I was doing. Jay had done it before. I said, “Jay, you come on, run the business side of the house, and I’m fine with giving you the CEO role,” because at the time, that’s what I was doing, as long as I have final say on whatever product we decide to…

Arrington: Has that caused any stress in the relationship? With you having final say on the product?

Rose: No, not really. We battle, we have healthy battles back and forth about certain things, but at the end of the day, it all works out.

Arrington: So, ‘06, we’re only up to ‘06 now, but I think we’ll go a little faster, ‘06 was when all the acquisition rumors started. I remember, I forgot which blog, a small blog said, “It’s guaranteed, I know that Yahoo bought Digg.” Was it $20 million is what the rumor was?

Rose: Twenty, twenty five, something like that, yeah.

Arrington: Was there any truth to that? Were there discussions going on or was that just completely fabricated? Already you were getting interested…

Rose: We were talking to… That was at the point where all of the sudden, Digg had enough media attention to where a lot of companies started knocking on the door. And a lot of the times it was, “We don’t understand who you are or what you do, but we hear that you’re the future of news, we want to talk to you.”

Arrington: Yeah.

Rose: Especially the second one rumor appears, then you get calls from five other companies saying, “Is this true? Is this true? If so, let’s talk, let’s talk.”

Arrington: Yeah.

Rose: So, Yahoo had purchased Delicious, and I’m friends with Joshua Shackner and he called me up and said “are you talking to here at Yahoo? If not you should be.” Like he had been talking to some folks there, made some introductions, and there were some conversation going back and forth but it never got really crazy serious. We never got to a term sheet or anything like that.

But, those were the days of “you were a distraction” it was a major distraction for us, and looking back on things I probably would have just pushed that all aside and stayed focused on the product. Because I’m getting phone calls from Rupert Murdoch, I fly down to L.A., sit down, have lunch with him, he invites us out for drinks. He wants to know how this might work out. Fly out and be with Barry Diller.

I mean this is an honor and a crazy exciting time. I’m sitting here thinking “Wow, I could never, ever hope to have an audience with these guys and now I’m sitting here hanging out with them.” It was nuts.

Arrington: So, that was a three year period through ‘08 where… I mean barley a month would go by without a huge rumor that you guys were getting bought.

Rose: Right.

Arrington: And you look at massive growth, lots of attention, everything was going great. Although you had some side projects which you still do. But, obviously very focused on Digg, and it’s well documented that offers were made and two parties never really came together. You raised another round of funding in the middle of that, at the end of ‘06, another eight a half million. Is that right? Something like that?

Rose: That sounds about right.

Arrington: That’s all water under the bridge at that point. Last year, it seems like things sort of peaked. Early in the year it seemed like there was interest from Microsoft, or Google, maybe some others. Google seemed to be pretty interested, at least from my sources and they came pretty close to buying you guys. I suspect that you’re not going to talk too much about this since it is recent history, still. But, there seemed to be an almost acquisition in the middle of the year, didn’t have, and you guys made, it seems to me, a conscious decision to regroup and really focus on the core business and the long haul. Is that correct, or…?

Rose: I think that there were some pretty intense conversations with a couple parties; and at the end of the day, I don’t think we’ve achieved our grand vision of having… I always talked to the staff about a world where Digg will have a 20, 30, 50 thousand votes on stories and articles, and really democratizing media. I just feel as though we have a long way to go.

The question is… often times when these deals come to the table is it going to be a situation where…

Arrington: Of course you…

Rose: Two plus two equals ten, well not necessarily.

Arrington: Oh, no, I’m sorry. I thought you were going to it’s a situation where they buy us and then we go into deep freeze, which is what happens to most acquisitions.

Rose: Right, right, yeah, exactly. Which really bothers me because you see this happen time and time again, you see these little great ideas, start ups, and all of a sudden it turns into more process and overhead and it’s not a win. It’s really kind of “Oh, well that was fun” and then it just goes to fizzle out, and that’s the end of your baby.

Arrington: Normally, I’d call bullshit on that. I’d just say “Yeah, that’s great but $100 million in your pocket might get you over your concerns for your baby.” The one thing I heard is that in the last round, so you did another round late last year, it was a bigger round. You raised $29 million, $28.7 million, something like that. You and Jay maybe some others took a little bit of money off the table.

What I heard is that you actually could have taken a lot of money off the table, and you elected to take very, very little. There was more money that wanted to come in than you guys took. What was the thinking behind that? You could have taken $10 million of the table at the point if you really wanted to, right?

Rose: I think that it’s a pretty common thing in the valley with all founders of companies that get to a certain size to have in later rounds venture capitalists approach you and say “we understand you can sell, we know that you could take this offer at $20 million, or $50 million, or whatever it maybe. But, we believe five years from now, you’re a $5 billion company and we’d like to see that upside. So, as part of this next round we will buy some of your stock.”

Arrington: Yeah, but you’d want to sell that much, is that right?

Rose: Well I’d want to talk about what I have or have not sold.

Arrington: All your investors are willing to talk about it. The rumor I’ve heard is you took a million dollars off the table. I don’t want to get into your personal finances, but it seems to me that it’s pretty clear you could’ve taken a lot more than you did, whatever that number is. Is that because… is there some reason because you really want to see this through, and you really think this is a billion dollar business someday?

Rose: I’m just speaking in general terms here, but in speaking with a lot of my friends that are in similar situations and are founders of other companies.

Arrington: Like who?

Rose: I don’t want to… I’m not going to name names. You’re very good at this. But, one of the things that-

Arrington: Yeah, we’ll turn the camera off for a second.

Rose: Yeah, right. I’ve seen you do that before and the camera’s still rolling. One of the things that is pretty common is… one of the things that you want to weigh when you’re trying to figure this out is “OK, if this were to blow up tomorrow I don’t want to make sure that this is a waste of my time.” At the same time, you want to have enough equity still left in the company that you could see that upside down the road.

So, I think that if you believe in your company, you’re not going to sell all your shares, you’re going to want to hold onto that and continue to charge ahead. So, I am still that single largest shareholder at Digg, and I believe in what we’re trying to build and I know our product road map is as solid as it’s ever been, and I’m excited to keep plugging along.

Arrington: So, let’s shift topics a little bit and talk about plugging along. You guys have always been pretty innovative on the product side, while keeping the core idea. Obviously, you’re not going to mess with that where people vote for stories, and then people see the stories. You’ve done a lot of things over the years to combat – not spam, but sort of fake voting – there’s so much traffic at stake, and creating algorithms to try to figure that out, and group people together who are voting as blocks.

Rose: You’re just making some of this shit up now.

Arrington: No, I mean you talked about how that’s an ongoing battle, right?

Rose: Right, yeah, yeah.

Arrington: What I want to understand, I don’t think that’s actually that interesting. I agree it’s probably an ongoing battle which you’ll either win or lose. But, what’s more interesting to me are some of the things you’ve done more recently. I’d like to understand what you’re plans are for the future broadly – around the Digg Bar, which you’ve just recently launched, and around the new search, which really seems to be two years too late. But, you’ve finally got around to fixing search, and it’s excellent. So, you’re starting to do some really interesting things with parts of the project.

So could you talk a little bit about search, and Digg Bar, and what you think is going to happen in the future.

Rose: Sure, which one do you want to cover first? Digg Bar?

Arrington: Let’s go backwards, so let’s talk about Digg Bar first.

Rose: So, the idea behind Digg bar, we have these things internally called Digg ideas meetings where any employee can come and pitch an idea to the company and they’ll be often times prototypes of different ideas using our staging servers so that we can play around with real data and see what stuff’s inside before we actually push them on it.

The Digg Bar came up actually a few years ago. It was something that we had about two-and-a-half years ago. We had an actual mockup of it. We didn’t actually have it working until one of the employees picked up where someone had left off.

But, the idea is that we’ve known for a long time that it’s a really clunky process for someone to go click out, read an article, come back, Digg, and with our amateur things that we use to track behavior on the site. It’s oftentimes the click out really enjoys something clicked on, forget to click the story or click out, have to come back and then it’s just back and forth.

So, the idea was can we create a tool that adds value to the user when they go and visit this third party site. Will they find value and be able to Digg the story directly on the site if there’s now a Digg button in there? Will they find value in looking at related stories and more stories from that source? Is there value in showing the number of times the page had been viewed, not just the Diggs but the overall global use? Also, you want to make it so that it would be easy for you to be able to share that person’s, that publisher’s story into other social graphs.

So one click out to Facebook, one click out to Twitter, all integrated into a single bar that also happens to do short URLs at the same time.

Arrington: Which is great for Twitter and yeah…

Rose: Right, which is great for Twitter. So, it’s like it was this big, massive collection of a bunch of different ideas all coming together and it was something I’m really excited about because I think from a registered user’s perspective, the data is clear. Our Diggs – 43 percent of Diggs now occur on the Digg Bar itself, and it’s huge. That’s huge for us. People are clicking on…

Arrington: Which really means people really do want to check out the story before they hit that Digg button.

Rose: Right. Absolutely.

Arrington: Before they either dug it really without reading it, just based on the title of the summary, or they clicked out and then came back.

Rose: Right.

Arrington: Yeah. So, you’re probably seeing…

Rose: Well, we’re seeing Diggs up as well. So, what once was click out, I read it, oh, I’m moved on to something else; it’s click out, I read, oh, I really enjoyed it and I Digg it, which is great for helping surface other stories to the front page. It’s also great having users interact and view other similar stories or more from that source to drive people deeper within that one site.

But, we figured let’s go out of the gate and turn it on for everyone and see if there’s a value across the board and see if the non-users think that the features such as views of related stories, related by source and comments like top most controversial and recent are enough where they would look at that and say, “OK, I’m not a Digger. I don’t have an account. I can’t participate and click Digg. But, these other value adds are something I enjoy.”

That feedback from the anonymous crowd was mixed, even in some of the registered users as well. The vocal registered users, I should say, can oftentimes swing one way versus when you take a look at the whole entire picture and how many people are actually digging in the five million users that we have register an account on Digg.

Arrington: You have five million registered users on Digg?

Rose: About 4.8 million or something like that, 4.9 million or something like that. I don’t know exactly.

Arrington: But like 35 million uniques, right?

Rose: Right, 35 million unique among them. So, long story short, we sat back and just collected the data. We were taking a look at what people are doing with the bar. Were they closing it out? Were they closing and not blocking it, and we looked at all the different segments.

So, someone that comes in from the search engine, that’s called a search and wander. When they click out, what do they do with the bar versus someone that comes in from the Digg home page and clicks out that’s not registered versus someone that has a registered, and kind of looked at the data and then also took in the feedback from the SEO community, talking about how if a search engine comes in and has a anonymous user effectively and they try and crawl on these short URLs, Digg short URLs, I’ll post it on another site, will that impact their Google Juice?

So, there was a bunch of different cards on the table and it was kind of one of those things where we said, “OK. We’re not going to need your reaction here in day two and it’d be like, hey, there were a bit of changes.” So, we sat back, collected a week plus worth of data, including a ton of our survey feedback forms that we had right into the bar which people would click at into the survey on what they thought of the bar. At the end of the day, it just made sense to simplify things and keep it a registered only user experience.

So essentially, if anyone – search engine, user, a non-user of Digg, receives one of these short Digg URLs through Twitter or wherever else in the universe and they click on it and they’re not logged in, it’s just going to do a straight out, 301 redirect to the destination site.

Arrington: Yeah. So, you announced a couple of days ago those changes. What about just the effect of the Digg Bar there? Are you seeing a huge increase in the Digg visitors from people using it on Twitter?

Rose: Yeah.

Arrington: Yeah. I mean, like how many?

Rose: I mean, not huge, but it’s… I’d have to get you numbers from our staff.

Arrington: Regarding the material, a 10 percent to 20 percent increase?

Rose: Do you know what the numbers are? I don’t either. It’s not a 20 percent increase in uniques. I’m thinking it’s around the five percent to 10 percent range, or somewhere around there. But, that’s…

Arrington: Which is great.

Rose: Which is great because it’s allowing us to bring in more users to put on our stories that could just be on the site.

Arrington: What about search and let’s start to think – like you said a few minutes ago that your grand vision is you’d have stories with up to 50,000 Diggs on it. Now, what’s some of the bigger stories out of 5000 Diggs like?

Rose: In any given week, there’s a story from like 13,000. So, our big stories are the 13,000 to 15,000 Diggs. If it’s insane, like a president gets elected, mostly we’re talking like the 20,000 to 30,000 world.

Arrington: Let me ask you where all the top stories are in the tens of thousands of Diggs. How do you get there? How do you bridge from here to there and how long is that road?

Rose: That road is a lot shorter than you would think.

Arrington: OK.

Rose: I mean, I’m not going to go into details but…

Arrington: Sure.

Rose: Product details, but I will say we’ve been talking about – I think that we kind of just could give a really good overview of the four years and leading up into this point, and I think that there was only one time in Digg’s history where really… Well, two times, I think, that we really kind of did more than just add-ons. Like, Digg has always been launched – we’d launch the site and then adding feature, feature, feature revision and feature revision, right?

The big kind of product changes for us were 2.0, which went from a nasty, ugly design with no AJAX and still more interactive experience, expanding it to all categories, so getting out just the tech. What we’re working on now is what I would consider to be the biggest overhaul to how everything works behind the scenes, and that’s no joke. Like we…

Arrington: Are we talking rewrite tech stuff?

Rose: Completely new directions for us that you will look at and I guarantee you would be like that’s a ballsy move. Like it’s really, we’re evolving and we’ve got some really exciting things that we believe are going to take us to that turn.

Arrington: Is that this year?

Rose: I mean, I’m not going to give out hard dates, but it’s some time in the next six months.

Arrington: What might that look like? Like, what are we talking about?

Rose: Well, we’re talking about a revamp of the site.

Arrington: Like a logo change?

Rose: Yeah, a logo change is going to get us there. We’re talking about some lens flares on the logo…

Arrington: Well, what are you going to do so that somebody’s going to, like, “Hey, here’s the stories.” And they’re saying, “Digg it!” I mean that’s kind of it. Right? It’s like a one trick pony with bells and whistles attached. I mean, I agree that most of your changes are bells and whistles. So, what is it that you’re going to do that doest kill your core idea that’s a whole new thing?

Rose: I can’t go into that stuff right now.

Arrington: Can we see a screen-shot?

Rose: Sure.

Arrington: Do you need to raise any more money this year?

Rose: No. We’ve put a lot of time and effort in focusing on revenue in the last six months. As we should. We essentially have started to build out our ad sales team. We’ve got another year and a half with Microsoft. And our ad sales team now is starting to focus on more custom integrations with bigger ad campaigns. So, it’s exciting.

Arrington: Does Microsoft… How much revenue is Microsoft? It’s like 100 million over the three years of the contract. Something like that?

Rose: We don’t disclose that stuff.

Arrington: I’m pretty sure that one night you told me that. We were having beers. I’m pretty sure you said 100 million dollars.

Rose: Really?

Arrington: It’s a three year deal, it’s up next year. And now you’re going, “Direct sales is the future.” But the new product stuff isn’t around revenue. Right?

Rose: No, it is. There’s a piece of that as well. Absolutely. There’s a big component around revenue, which is nice because for the first time… I feel as though it’s always kind of been this awkward built-on to Digg. It’s always like, “Oh, we have these plans. Oh, we can do a custom thing with Digg dialog.” Or something like that, right?

Arrington: Oh it’s the new ad product that we talked about. Remember? You told me this last year. Well, you never told me this, but I was thinking about it last year, which is – You have ads that basically people vote on. And the better the ad, the cheaper it is, and the higher it gets ranked.

Rose: Is an ad product really going to get us to the world of 30 to 50 thousand Diggs? No.

Arrington: No, but I love that product. I do like that product idea. You know what I’m saying, right?

Rose: I know what you’re saying.

Arrington: This is where it’s writing the story, and people vote on it based on it based on how good the ad is. I think there’s something there. I don’t know quite what it is, but the idea is like, the higher it is, and maybe even the cheaper it is, the more people vote on it. And that really encourages really good ads. Whatever those ads are. I think that’s interesting, so…

Rose: You always wonder why… You asked me one time why… What was that question with the off-handed comment that you made about, “What is your staff working on?” Because we had so many developers.

Arrington: You had 70 engineers, or 50 engineers out of 70 employees at one point. Right?

Rose: I don’t think it’s 50 engineers. It’s probably about 40 or so.

Arrington: Yeah and it’s Digg, what do you need? Like one guy? And then, you know, some office guys to keep the surplus revenue up.

Rose: How many office guys do you have?

Arrington: Oh, we have like one tech guy.

Rose: How many servers?

Arrington: Three, I think.

Rose: Well, that’s the problem. Not to say your site is not huge, because I know you do a good job with the cash. I mean, I think you work with Chris, right?

Arrington: Yeah. Media Temple does all of our hosting.

Rose: Yeah, Chris is amazing.

Arrington: He’s absolutely amazing.

Rose: He can tweak anything to run off, like, a couple of servers.

Arrington: Yeah, but what the hell did you need with 50 engineers when…

Rose: Hundreds and hundreds of servers my friend. And new projects are in the staging environments. Just, it requires…

Arrington: It wasn’t my argument that you guys weren’t stupid, it wasn’t that they were doing nothing. It was that you were working on some big things.

Rose: Big new things are coming.

Arrington: But then you laid them off. Right?

Rose: No, absolutely not. We still have a team of 40 or so engineers.

Arrington: OK. Total employees? 50?

Rose: 72 or 70.

Arrington: Oh I thought it was 70 before the layoffs.

Woman: We still hire.

Arrington: OK. Well again, I don’t want you to talk about… And you’re not going to talk about the new product. And actually I didn’t even know…

Rose: I will say this. I don’t want to get into specific details about the product, but I believe that it’s time for Digg to get a little bit more real-time in nature. And we need to be a living and breathing site. And you know, that’s an exciting direction for us. I think that’s part of the reason why we rolled out a pretty awesome search. It was kind of us experimenting with some of that.

Arrington: OK, well that’s a teaser. That’s great. One thing that concerns me is that massive more participation on the site probably means… Which is a good thing but it probably means, on the downside, more trolling.

Any community, the bigger it gets… And Digg long ago hit that point where you get a lot of negativity from users. And you guys have done as well as anyone in fighting that and keeping the community as positive as possible and as interesting as possible. But, how do you fight that in the future? If you get orders of magnitude bigger, what do you do?

Rose: Well, I think that it’s clear that you can’t throw 35 million people in the same sandbox and expect them to always get along. There’s no doubt about that. It has to do with fostering positive communication among friends and peers, and then also the way that you slice the data. And giving people a place to hang out and call home that might not necessarily be just the Digg front page.

Arrington: Just a couple more questions if I can.

Rose: Sure.

Arrington: So you guys have had, obviously, a lot of competitors over time. You had Reddit, which eventually Conde Nast bought. It’s now part of Wired I guess. Mixx is out there. There’s Hacker News, which is a great site run by Paul Graham. You’ve seen that I’m sure, right? It’s sort of a Digg site just for tech news.

Rose: Yeah.

Arrington: There’s Netscape which became Propeller, which really seems to be on its last legs. I think TechCrunch is actually quite a bit bigger than Propeller, and obviously we’re a blog

Rose: You can remember now.

Arrington: No, I don’t see that happening. I mean it’s very small. Oh and there’s also Yahoo! Buzz. So, I mean Yahoo!… Big guys, Yahoo! And AOL gun for you. And then there’s the small sites. I think Mixx in particular considers itself to be a competitor. Do those guys really have a chance to… Do you feel like you’re so big now that…

Rose: [Shakes his head no]. I don’t feel that we’re so big now, I just feel that we’re heading in a different direction than them.

Arrington: Well, see that gets back to the… You’ve got to remember the golden goose, or what’s that saying? Like you have this thing that kind of works.

Woman: The golden egg.

Arrington: Yeah, the golden egg.

Woman: The golden goose that won’t lay the gold egg.

Arrington: Maybe we could edit that to make it sound a little more intelligent but…

[laughter]

Arrington: Then you have the golden egg or the goose, and you can’t screw that up. Right? So how do you… I guess what I need is more details on what you’re… You know, the new real-time stuff.

Rose: Yeah. Well, I’m happy to, when the time comes where I can sit down with you and… I don’t think you do embargos anymore so I don’t know if that’s going to happen. Are you still on that train or not?

Arrington: I do embargos with PR groups that I respect and that have not screwed up in the past. And your communications people are pretty nice.

Your New Years resolutions include, you wanted to go on a date with Jennifer Aniston. And I assume that you were at least partially serious. Is that…

Rose: Partially serious?

Arrington: Well, I don’t know if it was completely a joke or if you really meant it. I mean, do you have a plan for that? Has it happened?

Rose: I was more joking than anything else. But, then again, if she wants to go on a date…

Arrington: Does she have a publicist or an agent that reached out to you? I mean it seems like…

Rose: She didn’t said anything about this.

Woman: Look at all surfers that won’t Twitter.

Rose: Oh yeah that’s right, she hates people that Twitter so I’m kind of out.

Arrington: She has strong feelings about Twitter?

Rose: She broke up with John Mayer because he was tweeting too much.

Arrington: Oh. I’ve got to read more blogs about celebrity stuff.

Woman: That’s not going to work out for Kevin.

Rose: Yeah, it’s game over.

Arrington: OK. Well, thanks very much for your time. I really look forward to the new stuff, and good luck with it all.

Rose: Thanks.