

Digg: A Cautionary Tale - DevX101
http://www.newsweek.com/2010/10/24/digg-a-cautionary-tale-for-web-2-0-companies.html

======
marcamillion
With all due respect to Mr. Lyons this paragraph insulted me - as a
hacker/entrepreneur:

 _Can anyone create an enduring business on the Web, where it’s easy to build
new companies, and when survival depends on the whims of fickle users? The big
lesson of Digg may be simply this: if someone offers you a ridiculous amount
of money for a company that wasn’t that hard to build, don’t think twice. Take
the money and run._

 _where it's easy to build new companies_?

A company that _wasn't that hard to build_?

How does he know that? Has he ever built a company?

I think that's quite contemptuous. This sentiment is exactly what Steve Jobs
was referring to when he told that Gizmodo/Engadget blogger (can't remember
which it was) that they should stop criticizing other people's work and create
something of their own.

Goddammit this pissed me off.

~~~
mynameishere
Consider the possibility that business writers might have some insight into
the operation of telecoms, financial companies, manufacturing companies,
accounting companies, law firms, consumer product companies, restaurants, etc,
etc, and not just tech companies, which is where the expertise around here
lies.

I could make a passable Digg clone in a weeknend. A _weekend_. I couldn't run
a single McDonalds franchise if you put a revolver to my head. That's what
he's talking about.

~~~
kyro
And by that same token, you lack the insight of what's _really_ behind Digg. I
doubt with the years of work they've put into it, tweaking algorithms, etc,
that you'd be able to duplicate it in one weekend.

~~~
jonknee
I'm sure I could find a way to alienate Digg's users in a weekend and that's
apparently what they've been up to for the past few years.

------
tgriesser
_Digg will generate about $15 million in revenue this year and still operates
at a loss_

Maybe my perception of the costs associated with running a high traffic such
as this are way off, but doesn't it seem like $15m in revenues should be able
to sustain the company... at least to the point where it doesn't operate at a
loss?

Anyone that has any experiences running a site on the scale of this might be
able to advise, I'm just curious where all of that $15m goes in a year -
unless the operating loss accounts for other costs that I'm not considering.

~~~
samtp
They have about 70 employees for some reason

~~~
rbranson
to compare, Reddit has like, 5. Digg is overfunded.

~~~
kqr2
But to be fair, Reddit is able to leverage the infrastructure of Conde Nast.
The 5 employees doesn't count HR, accounting, administration, etc. Of course,
that probably doesn't necessitate 65 extra employees either...

~~~
ryanwaggoner
Come on, you don't need any of those (as departments) when you're 5 people.
What 5 person firm has any need for HR, accounting, admin, etc. that they
can't get covered by outsourcing for less than the cost of a 6th person, let
alone another 65 people?

~~~
ultrasaurus
I'm with you on HR, but I can very much imagine a 5 person company needing
someone in accounting, a lot of staying solvent is keeping the money flowing.

So, that brings us up to... 6 :)

------
jasonfried
Our take on the infamous cover in 2006:
[http://37signals.com/svn/archives2/dont_believe_businessweek...](http://37signals.com/svn/archives2/dont_believe_businessweeks_bubblemath.php)

~~~
zaidf
They are rumored to have turned down 130M acquisition. Assuming that was true,
then sure he wasn't worth 60M but he would have gotten 15-30M, no? I like how
you guys think and am def. more excited by revenue than the other path to
riches(getting acquired due to the _potential_ in your company as seen by the
acquirer).

And yet, while you may have been "right" in this case, you could have easily
been "wrong". What if Digg _had_ been acquired for 130M or 200M? What do you
have to say about YouTube which was bleeding dollars until recently but seems
like it will go down as one of the better acquisitions of the decade? They had
very little rev; _lots_ of investment riding; and _far_ from profitability.
And yet Google acquired them for a buncha money.

May be it is not as clear cut as simply taking the revenue just as it isn't as
clear cut as taking the valuation from the last round?

~~~
staunch
Their recipe is simple. Claim every new major web company is bullshit. If they
fail say "I told you so". If they succeed say "They were just lucky."

~~~
spitfire
You know, that's a pretty good strategy. YOu'll be right a lot more than 50%
of the time....

~~~
dkarl
Yeah, but you'll be right on all the stories nobody remembers and wrong on the
big stories. That's why most people do it the other way around. "Never heard
of these guys? You will soon!" "The world is never going to be the same!"

------
michaelchisari
Has there been a better example than Digg of how detrimental it is to alienate
your users on the social web?

I'm surprised the article doesn't mention Reddit, which seems to have been the
main reason why Digg's numbers haven't bounced back, despite changing some of
the aspects which made users leave.

~~~
ROFISH
> Has there been a better example than Digg of how detrimental it is to
> alienate your users on the social web?

Facebook. It changed the day anybody (ie. parents) was allowed on. Now most
people I know either refuse to use the service due to employer paranoia or
just play Farmville all day, but it's not the same.

At least Facebook rolls with it, I suspect their new features (new Groups, new
Photos) seem to cater towards their current audience instead of "getting the
old spark back".

~~~
siglesias
Unlike Digg, Facebook lacks a viable alternative and is deeply reliant on the
network effect, meaning you need critical mass to migrate for the alternative
to be useful. Because of this Facebook's growth, in the face of customer
dissatisfaction in some cases, has been a hockey stick.

~~~
meric
Facebook is a good tool. I can put my photos on it, and all my friends, my
aunt, my uncle, my cousins, will all be able to see it. (Not my grandparents,
they don't have computer. :( ) Facebook "implicitly" notifies all those people
so I don't have to send a lame spam email "Hey I've posted some photos, check
it out". It is similarly good for organizing outings. Just create an event and
invite people, no need to send an email with 20 recipients; An forum-like
thing in the event lets people asks questions, which stays up and acts like an
FAQ.

------
flipp
So Digg is officially a cautionary tale now..

Newsweek is wrong though. Digg wasn't beaten by Twitter, or even by its own
redesign. It was beaten because instead of building a great community they
focused on being the best place to share links. And over time those links
started to suck.

Digg was really beaten by itself, and by Reddit.

~~~
marcamillion
Competitors don't kill companies, companies kill companies.

 _Editor's note: By companies kill companies, I mean the company kills itself_
:)

~~~
mahmud
And sometimes companies are killed by the Libyan government. Just ask diggly.

------
marcamillion
As an original Digg user, i.e. pre the HD-DVD crack code debacle, I don't
think Twitter was the cause of the demise.

It was HN, for me.

At first, I went to digg for the wonderful tech/startup stories that would
surface - then it evolved into meaningless crap.

I languished for a little, with no where to go, then found HN. People complain
about how HN is getting so bad, but it's nothing as bad as when Digg started
to get diluted by mainstream interests.

The truth is that Digg definitely had to cater to a broader audience to
sustain growth, and I have always been a Rose fan, but it's kinda sad to see
it go by the wayside like this.

At least Kevin tried something with v4, but it was too little too late.

~~~
kprobst
For many people it seems Reddit's the post-Digg destination. Certainly Reddit
has been growing by leaps and bounds and trying to keep up.

~~~
marcamillion
I know...it seems that they might be the antithesis, but Reddit just never
struck a cord for me.

~~~
kprobst
I like Reddit. It feels like a community, unlike Digg.

~~~
mtrimpe
As far as I'm concerned it's been going downhill fast since Digg collapsed
though.

I stopped visiting the main reddit page a few years ago and stuck to proggit
since then, but that also seems to have suffered a lot recently.

Does anyone know if the ex-proggit folks just moved somewhere else?

~~~
sprout
/r/netsec remains a great community. /r/coding is low-traffic, but
aggressively moderated and has good content/people. /r/web_design is a lot
like a slightly more informal version of Hacker News. /r/webdev is very small,
but hey, it might pick up.

Then there are lots of specific communities you can sign up for depending on
your religious beliefs that have various values... /r/emacs /r/vim /r/haskell
etc. most of the language specific subreddits have decent traffic.

------
mrschwabe
The fail free fall the site has fallen victim too is a direct result of
corporate media influence IMO. It wasn't too long after Kevin's Forbe's cover
shot and the bigtime acquisition talk that suddenly the algorithms started to
favor mainstream shit and those hard hitting bombshell articles that made the
site so great were burried or non-existent.

I was Digging since the early days. Even had a page of mine hit the front
page. It WAS a good site at one time. Before it got infected with mainstream
fluff.

------
jedwhite
Lyons is looking through the lens of old media (as he often does). He sees the
failure of Digg as being about the failure of hanging on to an audience.

But it's not an audience, it's a community - an involved community that felt
betrayed.

------
uurayan
<em>The basic problem is that these new-media companies don’t really have
customers; they have audiences. Starting a company like Digg is less like
building a traditional tech company (think Apple or HP) and more like
launching a TV show. </em>

This is always the risk in creating community based platforms that don't
monetize directly. One day you're the hot chick at the party, the next you're
that creepy old guy who keeps coming back to said party.

------
dennisgorelik
\--- The big lesson of Digg may be simply this: if someone offers you a
ridiculous amount of money for a company that wasn’t that hard to build, don’t
think twice. Take the money and run. \---

The problem with that "lesson" is that you never know what is "ridiculous
amount of money for a company".

Google might sell itself for couple hundred million too, but it would
obviously be a wrong decision.

------
kloncks
I really detest his writing.

Daniel Lyons writes about technology as an expert explaining the tech world to
a common non-techie. The problem is that he explains things in a way that
don't make sense, are false, or in this case just a bunch of mumbo-jumbo.

~~~
mikebike
Lyons is much more fun to read when he writes as his alter-ego, Fake Steve
Jobs.

------
StavrosK
> if someone offers you a ridiculous amount of money for a company that wasn’t
> that hard to build, don’t think twice. Take the money and run.

You hear that, Google? You should have sold!

~~~
jonknee
But Google was hard to build, it was revolutionary search technology that
demonstrably better than the alternatives. Digg was more akin to a hot new
bar. The value is mostly whoever else is hanging out, not the mechanics of
running a bar. Like what haooens with bars, Digg is no longer the new hotness.

~~~
StavrosK
My issue with that quote is that, sometimes, it's worth holding on to what you
have, even if people offer you a good deal at the time. Substitute "Google"
with "Facebook", "Twitter", etc.

~~~
jonknee
Sure, hindsight is 20/20 after all. But sometimes it's good to take the money
and run when you can (Friendster, Digg, MySpace). Taking the money is
especially tempting when dealing with value through audience and not
technology. Your audience can leave you as quickly as it came to you. If
you're real slick you can even sell at a crazy valuation and then buy it back
for cheap like Skype or Stumble Upon.

Facebook is an example of it "working out", but I don't think Zuck would be
feeling too terrible if he sold out and had hundreds of millions of real
dollars to do whatever he wanted with instead of billions of on paper dollars
to try and maintain. I'd be too busy sailing my boat to even know what
Facebook was doing, but that's me.

~~~
StavrosK
Hmm, true, you may have a point.

------
curtisspope
and Kevin left money on the table. Hood Business Rule #1 get your money then
get out

