Digg Looking for Buyers

So TechCrunch recently reported that Digg is looking to be acquired. Note that this is not official and is an unconfirmed report. Among the parties bidding on Digg are Microsoft and Google. I think it’s about time and if Digg doesn’t sell soon, it’s going to have to lower its expectations more and more. Honestly, apart from their “algorithm” which can easily be reproduced or emulated, there’s nothing special about Digg other than its large user base. That in itself is not a unique advantage. Yahoo just released a similar site called Buzz and I think Yahoo can find ways to leverage its massive user base and channel traffic through Buzz.

Are They Profitable?

My point is Digg isn’t really all that. They’re a private company so I don’t know what their finances look like but I suspect they operate around break-even or maybe they’re mildly profitable. I can tell you I have NEVER clicked an ad on Digg, in fact I’m pretty ad-blind to their ads, in that I don’t even read them or really notice them on the page. Ad blindness or ignorance is particularly common among techies, which make up a large part of Digg’s audience. So I wonder how much revenue Digg is actually pulling in.

Digg’s “Algorithm”

Either way, Digg is easy to copy. There’s even a module for the open source CMS, Drupal, called Drigg, that basically lets you run your own Digg clone. Maybe the algorithm is simpler but the point is Drigg shows how easy it is to replicate Digg’s core functionality. I hesitate to even call Digg’s algorithm an algorithm because it’s not that complex. I’ll call Google’s search engine an algorithm because that actually is very complex and difficult to emulate (or else someone would have done it already, like Yahoo or Microsoft perhaps).

Less Interest in Digg Over Time

I used to frequent Digg more when it was just tech news and I’d actually go deeper into the pages of news but they’ve now branched into so many things, it just feels noisy. And I hate how there’s so much content spam where the sites that show up on Digg actually aren’t the original source of the content. They’re either just reproducing it, linking it, or providing commentary which I don’t really care for. When I’m interested enough to click on a Digg link I want to see the original source. Now I pretty much only visit Digg every couple of days and I just check out the top 10 list. I kind of suspect the same cycle happens for most other users, some of whom probably never go back.

Sell Now or Risk Lower Valuation in the Future

So that’s why I think Digg needs to sell. The linked article mentioned Digg was looking for around $300 million before but it now expects less. And Digg has constantly been rumored as an acquisition target but nothing ever materializes, while other properties are getting snapped up left and right. I think that’s probably because no one thinks Digg is worth it. I still think it isn’t. After all, Digg hosts none of its own content and depends on users to post links, which numerous other services also do. Digg can easily lose huge swaths of users to other services. But companies like Google and Microsoft don’t mind throwing around 200-300 million bucks.

Actually Jay Adelson, Digg’s CEO posted a short statement saying the rumors of an acquisition are false but who knows. Regardless of that I think if the principals and investors at Digg want to cash in, now is the time. Keep waiting and that bubble will deflate even more.

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