

Betaworks to Pay $500,000 for Fallen Social Media Star Digg - uptown
http://online.wsj.com/article/SB10001424052702304373804577523181002565776.html?mod=wsj_share_tweet

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marknutter
This is a case of a company having delusions of grandeur. Instead of humming
along with 10 or so employees raking in cash hand-over fist, they tried to
grow as fast and as large as possible to try to revolutionize news. Instead,
Reddit did the former and is stable and profitable; it never pretends to be
something it's not.

Not all companies are going to change the world, nor should they. I see
Facebook and Twitter making the same mistakes. Perhaps Facebook is a great
place to keep in touch with friends but nothing more. Perhaps Twitter is
simply a great replacement for blogging, nothing more. Instead of filling
their niches and quietly making a small number of employees very wealthy, they
try to become these massive institutions that are reliant on very fickle user
bases. It's a house of cards.

~~~
timcederman
<http://vimeo.com/928615> \- I think this video from Digg sums it up well.

~~~
prayag
Why do you say that. This video shows the office environment which is fun.
It's funny with a lot of nerds trying to dance and look cool without looking
awkward.

In the hindsight, Digg might have made some wrong decisions but this doesn't
say anything about the company one way of another.

~~~
timcederman
In the context of the parent comment, it clearly shows the difference in
approaches between them and Reddit.

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ajacksified
Oh, WSJ, you never cease to make me giggle.

> _outmaneuvered by rivals like Facebook Inc. FB -0.52% and Twitter Inc_

Or, you know, Reddit, its direct competitor who mopped up much of Digg's
userbase.

~~~
patdennis
Reddit is mentioned later in the article.

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nikcub
There is a lot more to this deal, it wasn't a simple $500k outright purchase.
It sounds like the shareholding was restructured with old investors and
shareholders carrying over and betaworks taking up a large part of the
company. employee options were probably wiped out, a lot of the old investment
terms were probably restructured as well, with more recent money gaining favor

i'd think that the $500k is a token cash amount to settle who is leftover of
old stock and debt holders/accounts after you move all the other shareholders
over. Digg is definitely worth more than $500k (didn't 37signals want $400k
just for their job board thing?), Betworks didn't buy the entire co for $500k
and we don't know what the 'value' of the new company is, so the headlines are
misleading

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rmason
I mean no lack of respect for Kevin Rose but I've got to sit and reflect on
the differences between Digg and Reddit now that we know who won. I remember
one of the Reddit founders saying once not to focus on your competitors but to
just put your shoulder down and go.

So I have to contrast this Business Week cover:

[http://valleywag.com/assets/resources/2006/08/kevin-cover-
bu...](http://valleywag.com/assets/resources/2006/08/kevin-cover-
businessweek.gif)

To this early 2005 interview with the founders of Reddit. They were so humble
(it wasn't even our idea) and how they lived and breathed the site, even
waking up every two hours to check it:

<http://www.youtube.com/watch?v=5rZ8f3Bx6Po>

Kudos to the Reddit founders but the real lesson is that their sacrifice built
a better, stronger community.

~~~
bane
* [http://valleywag.com/assets/resources/2006/08/kevin-cover-bu...](http://valleywag.com/assets/resources/2006/08/kevin-cover-businessweek.gif) *

Let it also be a lesson in the difference between valuation and money.
Valuation is meaningless until it turns into liquid cash.

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brianlash
That strikes me as shockingly low.

For context, KillerStartups bought the domain "startups.com" 4 years ago for
$500,000. No IP, no brand recognition. The _domain_.

~~~
twog
Its a great deal for sure, but I would imagine betaworks is going to have some
other expenses associated with Digg and factored that into the negotiations.

~~~
larrys
True. At the very least $500,000 will cover some of the costs associating with
tying up loose ends when legally doing something like this instead of winding
it down. May be employment contracts, leases, colo costs etc.

Either way it is a good deal by smell test standard.

------
Osiris
I loved Digg when it was v1 and just a technology news site. They always had
great content that kept me up to date on the newest tech articles. Then they
started adding other news categories and the front page became a bunch of
random news articles that mostly didn't interest me.

Even if you went to the "Technology" page, it would only show those articles
that had made it to the front page, meaning there'd be less than 10 new
articles on that page per day.

Then it just started become spam with spammers using huge groups of users to
upvote bad content like infographs.

I've visited it a few times in the past few months just to see what was going
on and it's a really, really bad user experience right now. Really just awful.

~~~
gamble
If I was to speculate, I'd say that the early Digg audience may have been what
ultimately led them down the path to failure. The ranking algorithm on Digg
was blatantly rigged to produce a front page with mass-market appeal. Overly
nerdy or political submissions rarely made the cut. I suspect that, early on,
Digg's leadership decided that allowing users too much control over content
would keep Digg in a nerd/leftist niche that couldn't be monetized. A lack of
respect for democratic control over the front page ultimately led them to
ignore voting rings, gaming, and spammers; and eventually justified handing
over control to the marketeers and content farms in Digg v4.

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ojbyrne
I'd make a vague guess that the reason the price is so low is that betaworks
assumed some debts.

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hornokplease
TechCrunch is now disputing the $500,000 price in their coverage[1]

 _One source close to the negotiations tells us that the price was indeed not
$500k, but we haven’t been able to pinpoint an exact price yet._

[1] <http://techcrunch.com/2012/07/12/betaworks-acquires-digg/>

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kmfrk
Color (.com) paid $350,000 for the domain name alone. Silicon Valley is funny
like that.

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programminggeek
Remember when Digg raised $45 million and at one point Google was going to buy
them for $200 million?

I guess sometimes you should just take the money and run.

~~~
earl
Don't worry, Kevin took plenty of money. It's just the regular employees that
don't get shit.

edit: nobody knows the number for sure, but he had enough to do angel
investments in foursquare and twitter. See also crunchbase [1]. There was a
$28mm series C and the speculation seems to be a bunch went into his pockets.

edit2: after thinking for a couple minutes, there's something just really
unseemly about founders getting millions and employees plus investors getting
zilch, particularly in the context of a failed business. I think the idea of
founders cashing out a bit to free the company to swing for the fences is
probably good, but still. There's something about this result that just
doesn't sit well.

[1] <http://www.crunchbase.com/person/kevin-rose>

~~~
martinkallstrom
The reason the investor wants to give the founder an early earn-out is that
they don't want the founder to be defensive. If you've invested $45M and
you're looking to make ten times that, the site needs to make it really big.
And you don't want to have a founder looking for the quick win. You pay
him/her an amount in the ballpark of what is often colloquially phrased "fuck
you-money", and it increases the chances that he's willing to risk everything
to give you that 10x. For the investors, it's a calculated risk.

~~~
earl
I understand what it is. I understand why investors do it.

I reiterate my point: it's unseemly when founders earn millions and everyone
else, particularly the employees, goes home with nothing.

~~~
meric
That's why it is important for employees to demand market salary, startup or
no.

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oliwarner
This valuation is way, way, way off. I mean, add a zero to the end and I still
don't think you're close to a fair value.

Nice domain, tons of traffic, and a load of real users who you could keep
around if you wanted to. Even if you wanted to strip-mine the domain out and
dump the company, I can't imagine your costs are going to be anything
significant.

Whoever's managing this deal at Digg's end is screwing it right up.

~~~
27182818284
OK say you bought it. It is yours. What do you do tomorrow and this week to
turn Digg around and have it do something interesting?

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jmduke
Digg, for all of its issues, still has 4M monthly uniques and an Alexa Rank of
191.

Compare this to 37signal's Sortfolio, which sold for $480,000 a few weeks
back.

~~~
potatolicious
> _"still has 4M monthly uniques and an Alexa Rank of 191"_

4M monthly uniques that have been downright hostile to any attempt to monetize
their traffic. Alexa Rank of 191 with no avenue for actual money.

It's not all about the users.

~~~
jmduke
There's a difference between monetizing traffic and bastardizing content
(though I'll be the first to admit I'm not readily familiar with Digg's
community.)

I think there's still a pretty big niche to be filled with genuine high-
quality news aggregation. Even if they were to nuke Digg and start anew,
having that existing userbase is a big advantage.

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tsotha
_The buyer is New York technology development firm Betaworks, which is
attempting to revive a news-sharing site that was outmaneuvered by Facebook
Inc. FB -0.52% and Twitter Inc._

"outmaneuvered by Facebook and Twitter"? No. Digg's wounds were all self-
inflicted. Between the "power users" and efforts to monetize the site it took
on the look and feel of one of those fake news sites created to snare
Googlers.

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thechut
This article mentions that digg was "outmaneuvered" by Facebook and Twiiter.
But I don't think they are even really related, I was a Digg user in the early
days and it's Reddit that killed Digg in my opinion.

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larrys
"The price was only about $500,000, three people familiar with the matter
said"

Shouldn't the headline have added the word, "rumored"? Or maybe a Betteridges
law version "Digg to sell for only $500,000?"

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hastur
There's only one appropriate comment that sums up both this news item and the
state of Digg in general:

Who cares.

~~~
phene
I'm not sure anyone laughed harder than me upon hearing the news.

