
Kevin Rose: Digg Turned Down $80 Million Acquisition Offer - thiele
http://www.readwriteweb.com/archives/kevin_rose_at_disrupt.php
======
danilocampos
Digg is boned. Product is at a dead end and users are losing interest in the
community.

Meanwhile, they're funded up their ears. $40 million? For what? It's a bunch
of user-submitted links and discussions. You need a couple of developers, a
sysadmin, a designer, some sales guys. Am I missing any other roles?

100 employees for such a simple product is insane to me. I couldn't believe
they topped out at that number. I am biased – I prefer small, lean teams over
bloat, but come on, anyone can see this.

And now, yeah, they're boned. You're not going to get any significant multiple
of $40 million out of that business. Boy, the investors would have been
fortunate to get their money back period.

I guess that's just how the VC game is played.

~~~
mey
I'd love to see

* Number of Employees

* Monthly Active Users

* Server Operating Costs

* Monthly Revenue

for

* Reddit

* Fark

* Slashdot

* Digg

I'd assume the other sites would bury Digg (no pun intended) on at least
several of those fronts.

~~~
SwellJoe
reddit has more daily pageviews than digg by a few tens of millions,
reportedly. So, their 6(?) person team is outperforming 100+ digg employees in
the most important metric (revenue _might_ be more important, but I'm not so
sure...if I could pick a site to own, I'd choose the one that is bigger,
growing faster, and has _dramatically_ lower expenses).

~~~
bapadna
why are pageviews more important than visits, unique visitors or revenue?

~~~
SwellJoe
User engagement. A visitor that spends hours on the site each day, producing
content in the form of discussion, is worth a lot more than a visitor that
drops in for two minutes in order to spew some spam into the queue, and then
leave. I don't think there's any question that the reddit community is more
engaged than the digg community...a brief perusal of the comments at both
sites will quickly eliminate any doubt.

As for revenue, I said that more pageviews and much faster growth from a much
leaner organization was better. There were several variables in my statements.

Besides, it is not a small difference in pageviews. It's ~40%! Which pretty
much certainly equates to more visits and more unique visitors than digg.

No matter how you slice it, though, digg is a 100+ person operation that is
generating less value to consumers than a 6 person operation. Value to
consumers is a reasonable proxy for the kind of revenue you can generate from
a site. They just haven't found the formula for monetizing it yet. It doesn't
mean the value isn't there.

~~~
points
I'd bet money that a Digg user is far more monetizable than a Reddit user.

So I'd say Revenue is the best metric to compare, but I'm skeptical Reddit
will ever make much money - their users are spending all their cash on weed.

------
aresant
"Rose wouldn't go into details, but said that he was getting "burned out"

Nail in the coffin statement there, uncommitted leadership during crisis mode
is when all is lost.

I don't blame Rose from being burned out, bringing him back was more terrible
decision making from board.

~~~
troymc
Amber MacArthur and Sarah Lane interviewed Kevin Rose during net@night for
August 11, and he said he misses the days when Digg was small and they could
come up with an idea, and have it live by that night. Now Digg has 40-50 full-
time engineers, two data centers, and hundreds of servers.

Rose: "It's a big operation. To be honest it's bigger than I'm comfortable
with... and I'm very excited to hire a new CEO very soon ... I'm not cut out
to be a CEO of this size of company."

Inspired by 37signals, he wants his next company to be a small group of 10-15
people "based out of Portland or something... Chillin' in the woods, drinking
tea, chopping wood..."

Sarah Lane: "Are you still on that Portland thing? ... I've been hearing about
that for 10 years."

<http://twit.tv/natn163>

~~~
pyre
I'm in Portland, and I don't think that "chillin in the woods, driking tea,
chopping wood" accurately describes it.

~~~
cullenking
Then what else is there? Chillin in a garage, drinkin PBR and working on a
fixie?

I think the better things to do here in Portland definitely involve things
like chilling in the woods and chopping wood.

~~~
pkghost
Umm, hello? Modest Mouse? Meth?

// nostalgic Portland ex-pat

~~~
pyre
PDX Ignite, PDX Hack-a-thon, OSBridge, OSCon, etc

Not to mention all of the bicycling stuff that goes on. Being a vegan, there
is an awesome vegan community here, with a potluck almost every weekend.

For example:

1\. Portland Vegan Iron Chef, for example, went from an idea to an event with
a venue that was too small for the number of people that wanted to attend
within a matter of a couple of months. SupremeMasterTV even showed up to film
it -- not that they are 'mainstream' or anything, but it wasn't just a couple
of random people in their garage either.

2\. Vegan Convergence went from just an idea that someone was kicking around
(the idea that there were a ton of vegans in Portland that he didn't even know
-- 'convergence' as in bringing all of the different groups together to expand
social circles) to an event in the part w/ 150+ people responding as attending
on Facebook (dunno how many actually showed up; there were a lot of people,
but people tend to come and go at various times at these types of events).

I guess it just depends on the circles that you are in... I'm sure there are
some people that describe <insert name of city> as 'sitting in the garage,
drinkin some beer' because that's all they do.

~~~
cullenking
I am a big cyclist (it's my business), and I don't know what other large
cities are like, but Portland's bike scene is a disaster. I can't believe the
animosity that's been fostered between drivers and bikers, but I went from
easily doing 100 miles a week to not wanting to ever get on my bike in about
two months. At least a quarter the rides I do involve pretty
frightening/stressful situations like being swerved/swore/honked at. Call me
thin skinned, but damn these people are nuts.

Can't attest to the vegan thing - I am a reformed vegetarian who enjoys a
tasty 5th quadrant burger here and there :) Oh, there we go, the beer! I knew
I was forgetting my favorite thing about Portland.

~~~
pyre
That may be, but coming from Toronto, Ontario, there are a _lot_ of cycling
events/rides/etc. It's totally awesome once a year, they shut down the bridges
for cyclists (even the I-5 bridge).

Last summer (2009), I was biking a 15 mile round-trip to work, and I wasn't
really running into issues, but I was also riding very defensively.

[I will admit that I wasn't a cyclist in Toronto, but -- as I understand it --
it is very bike-hostile (though there are bike couriers). If you think that
the west-coast drivers in Portland are crazy, don't move to the east-coast...]

------
RBr
I'm shocked that the Digg board turned down $80 Million. Unless it was an
overly complicated deal, that sounds like a lot more then it was / is worth.

The real value in Digg was always the unpaid community that powered it.
Programming, I.P. and tangible assets are worth a fraction of what Digg is
worth. In essence, someone offered $80m for the opportunity to put their hands
on the steering wheel of the once powerful group of people who contributed,
dugg and evangelized everything Kevin and crew did.

As Digg has proven, communities are fickle and without proper management,
motivation and reward, they fail. In retrospect, neither the Digg community
nor the assets it has are worth that much money. However, with a carefully
crafted goal, properly motivated community and importantly a plan that
includes a way to monetize the community, community based services could very
well be worth $80 Million or more.

~~~
mikeryan
According to crunchbase digg has taken $40M in funding. A multiple of less
then 2 on the investment doesn't seem to be the kind of deals to get VC's
excited.

At the time there was really no reason to not try to hold out for an extra
$40M or so.

Of course Kevin wanted to take it he's walking away with a significant amount
of that $80M in his pocket.

Heh it makes the Reddit deal ($100k in and sold for $20M) look effing
brilliant - and with the uptick in traffic its getting from digg v4 its making
that look like the much smarter play.

~~~
points
Agreed @ Reddit. Maybe a winning formula.

    
    
      1. Find a startup in a new area that is over funded (digg)
      2. Copy it, on the cheap.
      3. Get bought for a "cheap" price compared with what the
         over funded startup would request.

~~~
pkaler
It wouldn't work in this case. Digg did a Round C in 2008 of $28.7m. That's
when they were over funded.

Reddit was founded in 2005. Digg was founded in 2004 and did a Round A at a
reasonable $2.8m in late 2005. <http://www.crunchbase.com/company/digg>
<http://www.crunchbase.com/company/reddit>

The only way your plan would work in this case is if you have a crystal ball
in 2005.

Basically, your competitor bets after the flop and you're planning on playing
the hand while short stacked.

And on the flip side you may end up being the Jaiku or Pownce to someone
else's Twitter.

~~~
ahi
Bad example. Jaiku was bought by Google. Twitter keeps getting VC money, but
hasn't gone liquid/profitable yet.

------
jdp23
with good investors, entrepreneurs usually have a lot of leverage in
sitautions like this as long as the board sees them as crucial to the
company's success going forward. so i wonder how much kevin pushed it.

my 1990s startup got an early acquisition offer for $30M when their was only
$400K in; the VC left it up to us, and we decided we wanted to build a
company. a few years later we hit the wall and the board could have forced us
to take a lowball offer but we decided to see it through and managed to turn
things around. in the end with $16M invested, we sold to Microsoft for around
$60M ... the investors were split, but the executive staff (including me)
wanted to do the deal so after some discussion we did. we had great investors,
of course; not sure what digg's board is like.

~~~
aaronbrethorst
This was PREfix, right? (Hi Jon, haven't seen you in a while :)

~~~
jdp23
yep, it was -- good to see you too, Aaron, and apologies for the belated
response!

------
DevX101
A lot of people are here laughing at digg for turning this down, but hindsight
is 20-20.

Zuckerberg turned down $1Billion from Yahoo, and at least on paper is worth an
order of magnitude more now.

At the time, digg was a leader in a new take on publishing distribution. If
executed well, it could have very feasibly been worth more than $80M.

~~~
gnaritas
> Zuckerberg turned down $1Billion from Yahoo, and at least on paper is worth
> an order of magnitude more now.

Just because you won the lottery doesn't mean it wasn't stupid to not take the
cash. Zuck should have took the billion as a first time entrepreneur. It was
the better bet. Playing against the odds might be exciting, and you might even
win, but it's still not smart.

~~~
rewind
Depends whether or not you believe Zuckerberg genuinely wanted to build a
world-changing business. If that's his main goal (and the more I hear him
talk, the more I start to believe it), and he genuinely believes he can do it,
then taking the money isn't necessarily what's most important to him. I read a
lot about entrepreneurs getting shit on for not swinging for the fences, but
then they get shit if they turn down a billion dollar offer when they only see
that as a triple.

It remains to see how this all plays out, but when you turn down a billion
dollars, I think there's a good chance you're doing it for more than the
money.

~~~
gnaritas
Still doesn't matter. Your first shot out of the gate, you take the money
because it enables you get money out of the way. Everyone needs money. You
swing for the fences the second time out, after you've got cash in the bank
and don't need the money. That's the smart thing to do, play the odds. Zuck
went against the odds, that wasn't smart, it was immature; he seems to have
beat the odds so it worked out, but it was much more likely to go the other
way, and it still could. Something could wipe out Facebook just like Facebook
wiped out MySpace.

~~~
neilk
I have a feeling Zuckerberg is not going to have to worry about money no
matter what happens. Even in 2007 he was clearly headed for multimillionaire
status.

I don't know him personally but at the time he reputedly lived on a mattress
in an empty room in Palo Alto. Maybe he's the kind of guy that values winning
more than the accoutrements of success.

~~~
gnaritas
If facebook hadn't taken off, I doubt anyone here would know who Zuckerberg
was. He rode a fad to fame and capitalized on it and made many a blunder along
the way. He's no different than Kevin Rose and Digg. Facebook's popularity
will wane, people will abandon it; many people already are in the sense that
they don't check it much anymore. Something else will come along and the crowd
will have a new toy.

~~~
dillydally
In what universe is Facebook a fad? There are billion-dollar companies built
on their platform, ferchrissakes!

~~~
gnaritas
Platform, lol. The site was better before the platform enabled apps. The
entire platform is faddish, it's popular because it's popular and everyone
else is doing it; until they aren't, then you stop. There are billion dollar
industries that are entirely based on fads, movies, music, games, or fashion
for example. The amount of money has no bearing on whether something is
faddish. For most, facebook is entertainment, the entertainment industry in
all its forms is all about fads and popularity.

~~~
dillydally
Every company is around until it isn't. Blockbuster just declared bankruptcy
-- does that make Blockbuster a fad?

Facebook is six years old. 500MM people use it every month. They are
profitable and do over $1Bn in revenue. They have a platform, on top of which
there is at least one $1Bn company (Zynga).

Groupon, also a $1Bn company, owes its success in large part to Facebook's ad
platform.

Facebook is now moving into location and online payments. They will compete
with PayPal, another $1Bn company (before being acquired by eBay).

Zynga is PayPal's second largest merchant, after eBay itself. Through Facebook
credits, Facebook will be taking 30% of each of those transactions. They are
building a database of credit card numbers to do it.

Tencent QQ, a Chinese social network with gaming elements -- most of the
popular genres on Facebook were taken from popular Chinese social games, e.g.,
the farming genre -- is 15 years old and did over $1Bn in revenue last year.

Tencent's IM product has 610MM monthly active users and 63.2MM people with
subscription accounts.

[http://www.tencent.com/en-
us/content/ir/fs/attachments/inves...](http://www.tencent.com/en-
us/content/ir/fs/attachments/investorintro.pdf)

When does this stuff stop becoming a fad?

Sure, fine, there's some universe in which Facebook vanishes tomorrow. The
demand is still there. Social networking is here to stay.

The only way Facebook will fall behind is if they slow down and let someone
else pass them, but given their history of aggressive and forward-thinking
innovation, that seems unlikely for at least the next 5 years and/or until
Zuckerberg stops caring.

And "it's popular because everyone else is doing it" -- you just described
every business built on top of network effects. Craigslist is popular because
everyone is using it. Does that make Craigslist a fad? eBay? VRBO? Etsy?
YouTube? HN?

Pet rocks were a fad. Slap bracelets were a fad. Snuggies are a fad.
<http://fmylife.com> is a fad.

Do you really think Facebook is that? Really?

I also notice that you didn't cite a single piece of data. Do you have any to
support your argument, or is it just your "intuition?"

~~~
gnaritas
I didn't say Facebook was going away, or that it wasn't big business, nor did
I say Facebook is a fad. I said he rode a fad to fame, that means it was a fad
and then it became something tons of people use as it fleshed itself out over
the years. If you don't agree, then don't, I don't care; don't get all bent
out of shape about it like I insulted your mother or something. I don't need
to quote sources to state my opinion.

~~~
adrianwaj
Facebook's as much as a fad as photo-sharing, sending people messages and
joining a discussion forum. Zuck originally said he wanted the relationships
on it to reflect real life. The only thing faddish about it, is people's
willingness to share their lives on it, and that's what Zuck wants to change,
he wants sharing and exposing oneself to be normal, after all, for him it's
all lulz. It's the over-exposing that is a fad as people start to want
privacy.

When it first came out, I thought this is just like a friggin Xoops
installation customized for college students (but custom built, and carefully
sold to the right people). Also, a lot of Web 2.0 ideas were just like Xoops
CMS modules (or WP plugins) but scaled out and adapted for mass website usage.
The Facebook platform is just like Xoops module deployment that users can
customize for themselves rather than the webmaster.

Theoretically, the only thing that could take out Facebook or come close,
would be some type of cross-language, cross-server middleware layer, that
webmasters could use that would simplify and improve web development, and give
broad social, ecommerce, presence and whatever other features are, or will
start to be in common. FB is in the best position to do that, and that's what
I expect to see going forward: it'll have to create standards and protocols
(an open source FB server?) and release those into the community.

------
fletchowns
This article on digg claims it has 293 comments:
[http://digg.com/news/technology/digg_redesign_tanks_traffic_...](http://digg.com/news/technology/digg_redesign_tanks_traffic_down_26)

After clicking "Load More" a couple times until it says there are no more
comments to load, $(".comment-body").length in the firebug console says there
are 104 comments. Am I missing something here or are they lying about comment
counts to make the site seem more active than it actually is?

~~~
thinkalone
Did you count the replies and hidden comments?

~~~
trustfundbaby
You needed to click load more for the comments right? Stands to reason that
you'd probably have to do the same thing for hidden comments etc.

~~~
fletchowns
So try it and prove me wrong. As I said before, that jQuery selector appears
to be counting all the comments, including the hidden ones.

~~~
trustfundbaby
I hate to break it to you ... but the burden of proof is on you :D

------
pigbucket
Discussion about whether the board should have accepted the offer would
benefit from knowing when it was made. In Digg's "heyday" is a bit vague. 80m
is a biggish bird in the hand but 20m of that was earn out and given that
Google were reportedly on the verge of a 200m offer in 2008, it's not clear
that whoever thought 80m was lowball was altogether insane.

------
dchs
I think the real story here is that he is "burned out" at Digg but excited by
his angel investing. Where might that lead?

------
TamDenholm
I bet the digg board are regretting the decision since the launch of v4.

~~~
rishi
The board probably wasn't making any money with a $80M offer. It is a top 100
site... why not go for it? They could have built a ton of other revenue
models... and they still can. They just need to start believing in it
themselves.

------
code_duck
This reminds me of Yahoo on one hand (should have taken the money before they
started tanking!) and Etsy on the other hand (70 employees was already far too
many, next they went on a VC fueled hiring spree and now have about 130). In
another similar move, Etsy recently brought back their old CEO/founder, to the
horror of many members who were around for the first three years.

------
kqr2
Any estimates on the current valuation?

~~~
mahmud
Not to start a bidding war, but I am willing pay $250 for the domain.

------
Mrdev4
So i guess the BW cover was bullshit.

[http://en.wikipedia.org/wiki/File:BusinessWeek_cover_14_Aug_...](http://en.wikipedia.org/wiki/File:BusinessWeek_cover_14_Aug_2006.png)

------
noodle
can't say i'd blame him, in digg's heyday, it was likely worth a good bit
more.

~~~
wriq
"While he was personally willing to take this offer, the Digg board decided to
turn it down." He wanted to accept it.

~~~
bond
They had $40million invested so i guess that's a little low to accept...

On the other hand this raises some questions for founders on getting funding
and what to expect down the road...

------
wiks
they need to work more on their own concept and should stop being inspired
from reddit.

