

Digg To Lay Off 37% Of Staff, Product Refocus Imminent - charlief
http://techcrunch.com/2010/10/25/digg-to-lay-off-37-percentof-staff/

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ajg1977
I've never understood why Digg required so many staff (~80) while competitors
such as Reddit have < 10 people. Bringing their numbers down to a level more
appropriate for their product (and revenue opportunity) can only be a good
thing.

~~~
baq
reddit has ~5 people and they _still_ have problems paying for themselves. i
can't imagine who paid for digg's 80.

~~~
dzlobin
Digg raised 40M in vc money, reddit raised 100K before they were acquired.

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siglesias
The Digg story just goes to show you that political metaphors don't always
translate well into tech. Digg was never able to diversify content (read:
_expand, scale, grow_ ) because it was never worth it for minority voices--and
here I'm referring to non-liberal, non-young, non-male, non-athiest users--to
attempt to carve out space and participate. The value proposition of helping
diversify Digg's content wasn't worth the time to newcomers.

And so those users of other demographics simply went elsewhere to build their
communities. The latest Digg was an attempt to push back against the niche
that ruled Digg, but then that niche just found another community as well.

Real life democracies, in government, exist as a compromise simply because
there isn't always the ability to pick up and move to a new nation state if
you aren't happy with the local rules. On the web it's all too easy to move
somewhere else, so typically all web communities are niches that push away
newcomers who are different. On the web democracy does not give rise to real,
long-tail diversity; it's just a quality filter.

~~~
michaelchisari
Which is why reddit's use of user created and managed sub-communities (ie,
subreddits) is such a brilliant way to pre-emptively deal with this before it
happens.

~~~
markkat
This is very true. I would have left Reddit long ago if it weren't for the
subReddits. I can still find the site/community that I love at Reddit.com.

------
lkrubner
I recall in 2006/2007 a lot of my clients were asking if I could build
integration with Digg, into their existing sites. Digg was huge back then, and
my clients put a lot of thought into how they might get more traffic from
Digg. Several of my clients thought it was essential to have a Digg strategy.

It is amazing to me that Digg could have fallen this far.

------
kloncks
I think the top problem with Digg is that the biggest founder, Kevin Rose,
simply has no incentive to follow through and give Digg a good exit. His
shares in Digg are too diluted and he's too heavily-invested outside of Digg
for that to ever be a possibility. He probably made more off of the sale of
ngmoco than he would with Digg.

As weird as it might sound, my ideal Digg situation is that Kevin buys back
shares from VCs (everyone knows Digg's over-funded) to get some sort of
monetary incentive to perform.

Digg's potential is so great. It's just sad to see it go down like this.

~~~
ojbyrne
My ideal Digg situation would be this poor neglected founder who has plenty of
incentive to perform being given an opportunity.

------
mjfern
Digg is facing issues on two fronts.

First, it’s struggling with delivering unique value to its customers. When
Digg launched in December 2004, it faced limited direct competition in the
market of social media aggregation. Since its launch, Digg now competes with a
myriad of services, such as Reddit (launched in 2005), Techmeme (2005),
Huffington Post (2005), Newsvine (2006), and Hacker News (2007), just to name
a few. There are now a huge variety of media aggregation websites targeting
general and niche audiences. In addition to increased direct competition, Digg
is now also facing a substitution threat posed by companies such as Facebook
(2004), Twitter (2006), and Google Buzz (2010). An increasing number of
consumers are turning to these services for their daily fill of news.

Second, Digg is struggling with an untenable cost structure. With about 72
employees before its reduction in staff, Digg has about 9x the number of
employees of Reddit, a key competitor. Consider another competitor, the
Huffingpost. It attracts about twice the number of visitors per month,
employing a full-time staff of just 60. Commentators have also noted that Digg
had unusually high infrastructure costs, although I suspect they have remedied
some of these issues since these reports. With revenue of just $15 million,
and a unsustainable cost structure, Digg is currently operating at a loss.

For Digg to survive and prosper into the future, it must refocus and develop a
service that delivers unique value relative to the many competing services
that are currently available. Given the range of competition, it’s not clear
what Digg can change to deliver unique value. Next, Digg must continue to
reduce its cost structure by reducing its human resource and infrastructure
costs. Needless to say, increasing value for customers while reducing costs is
a difficult challenge.

~~~
pg
HN doesn't seem a significant threat:

[http://traffic.alexa.com/graph?&w=400&h=220&o=f&...](http://traffic.alexa.com/graph?&w=400&h=220&o=f&c=1&y=p&b=ffffff&n=666666&r=3m&u=digg.com&&u=ycombinator.com&);

~~~
mjfern
Perhaps HN isn't a significant threat, but it still poses a threat; each new
service likely eats away at Digg's share of the market, assuming that people
have limited time to use social media.

As an anecdote, I was using Digg substantially up until the 2008 elections. I
haven't used the service since then. Instead, I'm spending time on Hacker News
(+ Techmeme, Twitter, Facebook).

~~~
csomar
You are no longer using the service because the signal/noise ratio is
crumpled. It's what happens when there are lot of new members and little
moderation as well as abusing/power users.

HN is a niche social website and I don't think that it eats from Digg or any
other social website.

~~~
evgen
HM alone does not, but one of Digg's problems is that they are facing a pack
of ravenous midgets that focus on one specific niche. If you are interested in
a small selection of niches then Digg is simply a useless place to go for
information -- what you care about will never surface and all you see is a
bunch of articles trying to game what remains of the general interest audience
Digg once commanded. You could walk down a list of all of the major Digg
categories and list two or three sites that do the job better for that
specific niche; this is what is going to kill Digg. Digg is like an online
social newspaper, and it is suffering the same fate that the print versions
have gone through with better competitors peeling off profitable niches and
leaving a dull husk behind.

------
mikeryan
Well that answers this question from yesterdays (Digg: A Cautionary Tale)
thread.

 _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?_

<http://news.ycombinator.com/item?id=1827027>

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pavs
Looks like someone with a brain finally took charge of Digg.

Also how common is it to offer to find jobs for people being layed off?

~~~
ceejayoz
> Also how common is it to offer to find jobs for people being layed off?

Very.

The uncommon thing is that statement being any more than a useless platitude.

~~~
simonsarris
Just for the record 'useless platitude' is a pleonasm.

~~~
mortenjorck
Upvoted for causing me to learn about pleonasms.

~~~
corin_
You clearly need to read Stephen Fry's autobiograph (Moab Is My Washpot) :)

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invisible
Management fails utterly in decision making and employees suffer by layoffs. I
don't see a bright future for Digg ahead given these actions.

Edit: This is on the basis that the layoffs will likely not be management.

~~~
timdorr
They just got a new CEO, so this is the new guy coming in and cleaning up the
mess, so to speak. He's doing what needs to be done to get back to
profitability, so it appears he's doing his job properly.

~~~
jpablo
I remember an article a few months back were someone argued that layoffs was a
tipping point for companies. The argument was that after the first round of
layoffs everyone in the company feel a little less secure about their job and
as a result the company stooped innovating. Anyone has that link ?

~~~
okaramian
I don't have the link, but this really depends on the company and how they
handle the layoffs.

Like if you have a round of layoffs, but you have employees with faith in the
management and the product, you're going to have remaining employees that
stick around and work hard. Generally people that don't fall in that mold are
going to get laid off in a situation like this.

If you have employees that are sitting there with an expectation that the
cpmpany will fail, however skilled they might be, they're going to start
looking at other options.

I think what I'm saying is: the initial tipping point in a case like this
isn't the layoff, it's the ensuing fallout. One strategy that I've seen fail
is using fear to keep people working. A "you're lucky you're still here"
attitude has had people (like myself) out the door on the first other offer
they find. An attitude of "this sucks, but we have to do it to stay around, no
one is to blame" (which Digg seems to be going with) prevents things from
going further south. Something like that can even unite the remaining group in
difficult times.

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nailer
Nice that Joe Stump, who IIRC was CTO during Diggs peak, but left some time
ago, just updated his Twitter to help any of his Digg friends who got laid off
find something.

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dennisgorelik
Note the comment from Michael Arrington:

\---

you'd be amazed at how people start adding up. We have something around 40
people at TechCrunch, 20 full time.

\---

and the replies to that comment, such as:

"How may of them were hired to boost your ego?"

"Yes, in the absence of efficient cost control and good management, expenses
always rise to meet income."

------
jacquesm
2010 has seen the end of diggs growth and it has also seen the beginning of
its decline. It went up a lot faster than it went down though, so they have
some time to correct course.

That's much harder than it seems though, attracting visitors to your site is
one thing, getting them to come back after they've soured on you is a
completely different one.

Digg always had a very large number of employees for a site in that segment,
but just throwing people out is not going to make things better in the short
term (likely worse). At least they'll stop burning money while they figure out
what the next steps are.

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endlessvoid94
It will be interesting to see if/how they pivot.

~~~
VladRussian
entering "25 mi/hr" turn at 100mi/hr ... may be it is a pivot if you're
driving a Ferrari or Lambo

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codyguy
Wonder what effect this will have on 1) the existing user base. Will it
further accelerate the defection of users or won't matter? 2) the retained
employees. What if a few "wanted" players leave voluntarily?

It'll be interesting to see how they plug and reverse the leak in traffic.

~~~
paresh97
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------
cletus
When the boat is sinking the solution is to:

1\. Throw stuff off the boat (including passengers);

2\. Bail water off the boat; and

3\. Fix the hole in the boat.

Kevin Rose tried (2). The new CEO is trying (1). Both of these delay the I
editable.

The hole in the boat in his case is the $40m in funding Digg has received. I'm
not sure there's any recovering for that.

The crux of Digg's problems is that it went the way of most online
communities: it became extreme, exclusive and inbred. That's hard to recover
from.

Ultimately Digg is now largely irrelevant. Twitter and facebook have
supplanted it as the sites for discovery for most people.

~~~
neworbit
Like a lot of people, I used to use Digg, and don't anymore. I think the hole
in the boat is much more that the committed userbase has moved on leaving it
to become a LOLCAT paradise.

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earl
I hope that the CEO follows through with this -- if so, it's the best thing
that can be done under the circumstances and a nice thing to do.

"It’s been an incredibly tough decision. I wish it weren’t necessary. However,
I know it’s the right choice for Digg’s future success as a business. I’m
personally committed to help find new opportunities for everyone affected by
the transition. Digg’s Board members have also offered to help find placements
within their portfolio companies."

------
paresh97
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