

Digg's Miserable Business Model, Losing Millions of Dollars - utsmokingaces
http://www.alleyinsider.com/2008/12/diggs-miserable-business

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spolsky
Digg raised $40mm in VC. VCs don't give you money to put in the bank... they
give you money to hire people and invest in things that might be profitable in
the future.

Yes, Digg could probably have bootstrapped. But they didn't, they raised
money, and once they did that, the money that the VCs gave them was meant to
invest, which is guaranteed to mean that the company shows a loss.

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Retric
If there was something useful for Digg to be spending that money on it's one
thing, but using more people to do the same thing causes failure. IMO the goal
should be to be profitable based on your income stream. With new capital you
can setup some R&D or spend that money on new projects outside of your core
company or advertising etc, but you need to avoid supporting the core of your
company with new capital. That way you can cleanly dump everyone that's not
part of making money and not kill the company.

PS: Every dollar you spend that's not supported by revenue should get the
company more than one dollar in profit.

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axod
As far as I see Digg has about 10 times the staff of Reddit. That seems a bit
excessive to me. What are all these people doing?

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arn
seriously, Digg just spends too much money. I guess that's fine and all for
expansion when the VC money is coming in, but they spent $10.4 million in the
first three quarters of 2008? Doesn't that figure seem insane for a company
like digg?

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graemep
On those numbers Digg has revenues of approx 3 US cents per unique visitor.
Not too bad, surely? How much could they charge for advertising?

It costs Digg about 5 cents per visitor. Where is that going? Seems excessive
for bandwith + servers. The content is user generated, I cannot believe that
they are spending much of that $14m on development or administration.

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mattmaroon
It REALLY depends on page views. Unique visitors has nothing to do with
revenue. 3 cents per visitor is very low if they have high pageviews per,
which I'm guessing they do.

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graemep
Yes, I was thinking unique visits, rather than visitors - my mistake. They
probably have a lot of people who visit daily, so the number of visits is
easily hundreds of millions, page views could be billions.

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tphyahoo
3c per visit sounds excessively high. How often do you click on advertisement?

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mattmaroon
It's 3c per visitor. If it were per visit, they'd be rich.

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vaksel
they have too many employees, my guess its an inferiority complex....big site?
means you need to have big company to back it up...meanwhile 1 person sites
like plentyoffish are raking it in w/o huge costs

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LostInTheWoods
Exactly. Same can be said for Facebook. These sites only make economic sense
if they can be run by small staffs.

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patio11
1\. Collect an audience of rabidly anti-commercial poor adolescents.

2\. Put up banner advertising.

3\. ???

4\. Profit

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potatolicious
The same reason why I don't believe Facebook will ever reach real
profitability - their primary audience is a bunch of poor, broke college
students, not to mention ones who are generally anti-corporate.

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Raphael
What about when they grow up?

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redrobot5050
One analyst put it best: "Who the hell thought it was a good idea to try to
monetize the space where someone publicly breaks up with their fiance?"

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vp
The advice in the article seems good.. digg.com/movies ads related to
movies/blockbusters digg.com/music music ads .... ads targeted according to
categories...

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mattmaroon
If you're going to editorialize in the link title, at least spell properly. Or
did you mean they're just taking the money to the park and setting it free?

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joe_the_user
Misleading title. The article actually compares digg to sites with a _similar_
model and points out how much more profitable they are. Titles matter...

Also, digg's design is poor. It has too much space spent on borders. With a
cleaner interface, it would have more add space to monetize.

