Digg, one of the first successful Internet social news-sharing sites, died a humiliating death earlier this week at the tender age of 8 by being slowly cut into pieces and sold off like a cow.
We can't be reminded of this basic tenet of business too often: If you don't listen to your customers, you're history. In Digg's case, it also alienated them. This is not often a good business strategy.
Ultimately, Digg was forced to sell its engineering talent pool to the Washington Post for about $12 million, some patents to LinkedIn for another $3.5 million, and the remainder (brand rights, servers, office supplies, coffee mugs) to Betaworks on July 12 for pocket change: $500,000. Betaworks will meld Digg into its News.me site.
Once Valued at $164 Million
The company once had been valued at $164 million in 2008 following its last round of VC funding by smart investors such as Marc Andreessen, Reid Hoffman, Silicon Valley Bank and Highland Capital.
Some background: Digg was a social news Website that pioneered the idea of registered users posting links to stories and voting them up or down. Digg called this practice "digging" and "burying," respectively. If a story was cited and subsequently got a lot of "diggs" (or even "burys"), then the writer of that story could count on earning a lot of traffic, and the Digg poster would earn some respect and/or notoriety.
In its best days, Digg ranked with Slashdot as two of the most popular places to go to engage in social news judgment on the Web, especially among the IT community. But Digg's influence slipped markedly with the emergence of newer, broader-based social news/networking sites, such as Reddit, Twitter, Facebook and scores of others. It also didn't change enough -- and in the right ways -- in the face of new competition.
According to Web analytics provider Alexa.com, Digg ranked No. 178 in traffic on May 15, 2012. Another analytics firm, Quantcast, estimated Digg's 2012 monthly U.S. unique visits at 4.4 million -- a far cry from the 20 million to 30 million it was getting four years ago, according to several Web analytics firms.
Co-founders Leave, Site Wobbles
In August 2007, Digg modified its main user interface, mostly in the profile area. Users, who get accustomed to formats and eschew changes (just ask Facebook about that one), didn't like it. Three years later, it changed again, and more users didn't like it.
Websites are all about usability and look and feel. Subscribers want to feel welcomed and nurtured; after all, they intentionally signed up to use the site. Digg's August 2010 redesign not only wasn't nurturing, it was a flat-out disaster, according to many former users who, ironically, used competing networks like Twitter to complain about it.
In the redesign, Digg axed a popular feature: the "bury" button for users' thumbs-down recommendations. Without a way to say "no" to balance "yes," users were handcuffed.
Digg also neglected its most active power users, who invested a lot of time lauding and degrading stories they had read on the Web. But rather than promote activity by its frequent users -- and best customers -- Digg did nothing. No wonder those users eventually fell away and found other sites that exhibited more appreciation for them.
After its co-founders and co-backbones, Kevin Rose (Google ventures) and Jay Adelson (SimpleGeo), left the company in 2010, it had peaked in both relevance and usefulness. Digg essentially became a spineless amoeba.