Executive Summary:
Digg was a social network and news aggregator platform that enabled members to submit and rate news stories, pictures, videos, and other types of content across a multitude of categories.
Digg failed because of poor product decisions, rising competition from other platforms, internal problems amongst its staff, and users trying to game the system for their own gain.
What Was Digg?
Digg was a social network and news aggregator platform that allowed users to submit news stories, pictures, videos, and other types of content.
The platform itself had a voting mechanism, meaning users could either upvote (‘digg’) or downvote (‘bury’) a submission.
The most popular stories would then be promoted on Digg’s front page. Alternatively, Digg also offered selected category pages, such as ‘music’ or ‘science’, to which stories could be posted to.
Stories that were inaccurate or spammy would then be moderated by simply burying them (and thus not giving them any relevance or exposure).
Each submission would then link out to the actual source through which users could click. Within Digg, users were also able to comment on stories.
At the heart of Digg’s platform were its users who would often spend hours reviewing and fact-checking submissions. Over the years, Digg had altered its voting mechanism and thus the weight one vote would have on a story’s popularity.
Apart from voting on its website, users were also able to digg stories within the content itself. This was enabled by the ‘Digg Button’, which users could click on when visiting an external website (similar to the social sharing buttons many websites run these days).
Naturally, the site evolved quite extensively over the course of its existence. For instance, Digg allowed users to link to their Facebook or Twitter profiles and even changed the way stories were ranked on its website.
These days, Digg is mostly focused on the submission of moderated stories by its own editorial team. It even publishes some of the content on the website itself.
The following chapter will take a closer look at how the platform came to be, its rise to worldwide fame, as well as its mighty downfall from being the poster child of the web 2.0 era.
What Happened To Digg?
Digg, headquartered in New York City, was founded in November 2004 by Kevin Rose (with assistance from Jay Adelson and Owen Byrne).
Rose, however, is considered the brains behind the founding of the company. He pursued a degree in computer science at the University of Nevada Las Vegas during the mid-1990s.
He then decided to drop out at the height of the dot-com bubble to work as a production assistant for Leo LaPorte’s TechTV channel.
By pure luck, Rose stumbled onto some valuable information with regards to Windows security, which prompted LaPorte to put him on camera. Right from the get go, it became evident that he was a natural on-screen.
At TechTV is where Rose would also meet Adelson for the first time. In 1998, he co-founded the now public Equinix, which he led as its CTO. Rose, who always wanted to launch his own business, convinced Adelson to become his mentor and, at times, even stayed with his family in New York.
Eventually, he rose (no pun intended) to the position of co-host after LaPorte left TechTV in March 2004. A few days later, Comcast’s G4 gaming channel merged with TechTV, which prompted him to move to Los Angeles.
Meanwhile, he was frequently bouncing off ideas with Adelson about various businesses he would like to start. One that particularly stuck with him was this concept of a news aggregation site. At the time, Slashdot had already introduced the concept to a wider audience but using it wasn’t as enjoyable of an experience.
Rose himself didn’t really know how to code. He, therefore, poured every last bit of his savings to pay a Canadian developer named Owen Byrne, who also received some minor equity stake, to develop the first version of Digg.
That version was successfully launched in December 2004. Just take a look at this gem of a video in which Rose introduced Digg to his TV audience for the first time (and note who the channel owner is).
A few hundred people, in large part because of Rose’s TV fame, joined the platform days after it launched. Rose then convinced his mentor Adelson to become one of his fellow co-founders and the firm’s CEO, which he decided to do in February 2005.
In those early days, Digg was dealing with a lot of scaling issues as the business was completely self-funded. Rose even had to raise a small seed round of $50,000 from one of his friends to keep the lights on and increase server capacities.
Around the summer of 2005, coverage on the platform began to increase. At the same time, Digg introduced v2 of its platform in July, which not only expanded its functionality but helped to dramatically speed up the site.
Meanwhile, Adelson and Rose were also working on other ventures. In May 2005, Rose reached an agreement with Comcast to release him from his contract. He would then go on to found Revision3, a production company, which became known for hosting Diggnation.
The weekly video podcast, which was originally released in July 2005, had Rose and co-host Alex Albrecht discuss some of the top stories going down at Digg.com. Albrecht and Rose would also review various alcoholic beverages while they were at it.
During its peak, the show had over 250,000 subscribers but was eventually shut down in October 2011 (after 340 episodes). But back to Digg for now.
In October 2005, almost a year after its launch, Digg’s team was able to raise its first round of funding. Various investors, which included Reid Hoffman and Marc Andreessen, poured a combined $2.8 million into the business.
The funding allowed Digg to significantly ramp up its server capacity (and thus increase speed) as well as hire additional developers. By the end of 2005, Digg had already managed to overtake Slashdot in terms of traffic.
Its rapid ascend also made other people take notice. At the beginning of 2006, Yahoo allegedly made a $30 million offer to buy the company – one of many more to follow. The founders, however, refused on the spot.
Digg simply continued to plug away by expanding its feature set. In March, it introduced the ability to rate individual comments and allowed users to follow others (and thus track the activities of their friends on the platform).
Interestingly enough, the firm’s exponential growth also led to a growing list of problems. For instance, users began gaming the voting system by artificially pumping up stories for marketing purposes. Some of those users were even paid in the background. One story suggested that members were using Digg to inflate The Sun’s stock price by promoting a fake story about Google wanting to acquire the company.
Later that year, in August, Digg introduced version three of its product, which brought a variety of new features such as new categories (e.g., sports or gaming) and new user engagement visualizations (namely Digg Stack and Digg Swarm).
Meanwhile, competitors also started popping up left and right. Netscape, which was ironically created by Digg investor Marc Andreessen and sold to AOL for $10 billion in 1998, launched its own copycat version. Fans of Digg took this personally and uploaded various spam files on Netscape which included pro-Digg messages and, in some cases, were even redirecting visitors to Digg’s website.
However, that wasn’t even the biggest story of the year. The success of Digg and Diggnation made Rose a media darling and the poster child of the Web 2.0 era. This prompted Business Week to run a cover story on him in which they stated that “at 29, Rose was on his way either to a cool $60 million or to total failure.”
This was an exaggeration at best and an outright lie at worst. For once, the company had never been assigned such a valuation nor had Rose or his founders liquidated the shares at that point. Regardless of its accuracy, the story propelled Rose’s fame to never-seen-before heights, which inevitably carried over to Digg.
By the end of 2006, two years after launching, Digg was claiming 20 million visitors a month and close to one million registered members. Acquisition rumors continued to run rampant as well. News Corp., which had acquired Myspace for a whopping $580 million back in 2005, was allegedly willing to buy Digg for $150 million. Yet again, the founders refused.
Instead, they went on to raise another round of funding (Series B) in December 2006. This time, much of its existing backers chimed in with another $8.5 million. They used that cash to make some fundamental changes to the system.
In February 2007, Digg removed its list of top users, who it ranked based on the number of stories they’ve been able to push to its front page. Given their vast follower counts, upvotes of those users often held much bigger weight. Apparently, some of those users took advantage of that by gaming Digg’s voting mechanism.
That move certainly didn’t alienate its user base as just a month later, Digg hit the inaugural mark of one million registered accounts. Unfortunately, peace would only last for a few weeks.
In May, Digg’s users revolted against the platform after it deleted a story that linked to the decryption key for HD DVDs, which resulted in a takedown demand. A non-apologetic by CEO Adelson only added more fuel to the fire.
Digg’s terms of service clearly prohibited the sharing of copyrighted files and materials to avoid being taken down like Napster was years prior. However, days later, Digg essentially said ‘screw it’ and succumbed to its community by reinstating the article.
Over the course of the coming months, Digg added new features like threaded comments and launched an “app” (or rather glorified mobile-friendly pages) for the newly launched iPhone.
Then, in July, it made waves by ditching Google, its previous advertising partner, for Microsoft. At the time, Digg’s sole source of revenue was the banner ads that were scattered all across its platform.
Digg also unveiled the Digg Button, one of its biggest growth engines in retrospective, to the public. The button allowed users to dig stories on other publications, which in turn would be upvoted on its platform. Right after launch, it managed to secure partnerships with The New York Times and Wall Street Journal, which indicated the significance Digg had managed to amass.
By the end of 2007, Digg was one of the world’s most-frequented websites. It even managed to partner with CBS News for its online coverage of the 2008 presidential election. However, Digg wouldn’t be Digg if it didn’t continue to be embroiled in troubles.
In January 2008, it introduced a new algorithm whose intention was to prevent users from gaming its ranking system. The update effectively punished people who voted in groups to endorse certain topics. As such, stories would have to be ‘dugg’ by a diverse set of users.
As a result, several of the platform’s top users held an emergency podcast to discuss their response to the algorithm change. After a couple of hours of heated debate, founders Adelson and Rose popped into their call and talked them down from boycotting the site.
Following the criticism that Digg didn’t listen to its users enough, it introduced weekly Town Hall meetings (in the form of a webcast) in which Adelson and Rose would discuss proposed feature changes and answer user questions.
During the summer months of 2008, yet another acquisition rumor began popping up. This time, the team was apparently very close to striking a deal with Google for $200 million. Months prior, the search giant had even introduced a Digg-like voting system into each own search results. The negotiations ultimately fell through as Google felt that Digg’s founding team wasn’t a fit for its company.
Instead, Digg yet again raised a round of funding. This time, Highland Capital Partners, alongside existing investors Greylock Partners, Omidyar Network, SVB Capital, poured $28.7 million into the company, which valued it at around $175 million.
The capital injection was very much necessary as advertising spend had dried up due to the financial depression. At the time, Digg had around 75 people on its payroll.
Furthermore, its traffic had significantly increased (< 40 percent) because of the introduction of a new recommendation engine, which surfaced even more relevant content to users. As such, server cost had risen as well while advertising spend largely flatlined.
That sentiment was in line with a Business Week article published in December 2008. It stated that during the first three quarters of 2008, the company had revenues of $6.4 million and losses of $4 million. On an annualized basis, that would be equal to revenues of $8.5 million, with $5.3 million in losses.
As a result, Digg had to lay off around 10 percent of its workforce (~ 7 people) in January 2009.
Moreover, the founders decided to abandon their advertising deal with Microsoft in April. Instead, the firm began to rely heavily on its own internal sales force to market available ad space on Digg. Microsoft would then get the remnant inventory, i.e., ad space that Digg wasn’t able to sell. Those ads went live in August 2009.
Digg’s traffic also continued to ascend as a result of various new features, including an integration with Facebook as well as the introduction of the Digg Bar. However, the latter also stirred up some new controversy yet again.
The Digg Bar, which was essentially a glorified URL shortener, had started to redirect users to Digg’s story pages instead of the source itself. While it did lead to greater page view numbers, it also felt like a sneaky way of keeping users on the platform.
When Digg turned five on December 4th, 2009, then San Francisco mayor Gavin Newsom proclaimed it “Digg.com Day” for the city. At the time, Digg had around 40 million monthly visitors and 80 employees in total.
At the beginning of 2010, Digg continued to add more significant features and products, such as a Chrome extension, its first official iPhone app, as well as the ability for publishers to automatically add content without human submission (through Digg’s API).
Unfortunately, not everything was always going according to plan. In April 2010, longstanding CEO Adelson resigned from his position. Allegedly, co-founder Rose and the board grew increasingly frustrated with how long it took Adelson to ship version four of Digg.
Kevin Rose replaced Adelson as interim CEO – a tenure that many believed lead to the demise of Digg. A day after he became CEO, Rose announced that they would remove the Digg Bar, a move that was generally well-received.
A month after, in May, Digg announced that it had to reduce staff by about 10 percent, which also included its CFO among other key executives. Yet, the biggest problem was yet to come.
Just days before Digg announced its new CEO hire (Matt Williams, who had spent the past decade in key roles at Amazon), Digg unveiled version four of its platform after a year of working on it. Unfortunately, (die-hard) users hated it right out of the gate.
Digg made a lot of significant changes, such as alerting the location of its sub-categories, making it tougher to follow friends, changing the design of the commenting section, and many more. It had gotten so bad that Digg’s users were intentionally pushing Reddit stories and links to its Top News page.
Instead of listening to the criticism, co-founder Rose simply ignored it and said that “if Reddit is your new home and it’s something you really enjoy I’m all for that.”
To make matters worse, the new version of Digg was also favoring publishers over actual human users by allowing them to auto-submit content. Soon after its launch, all of its categories were littered with stories that those very same publishers wanted to see getting exposure. On top of that, Digg had removed its bury button, which could’ve enabled users to downvote publisher stories.
All of this controversy essentially led to a mass exodus of users to competing platforms. Digg had already struggled to keep up with the rising relevance of Facebook and Twitter.
Now, even its most-loyal users were leaving the platform in favor of Reddit and 4chan, which traditionally had always been pro-user (even though Reddit itself was acquired by Condé Nast in 2006 and thus under corporate control).
CEO Williams had to try and find a way to correct the monumental mistake they made. In mid-October 2010, he announced that Digg would bring back many of the beloved features of version three.
Nevertheless, the damage had already been done. As a result of the user exodus, Digg had to lay off 25 of its 67 staffers, including Chief Revenue Officer Chas Edwards who had been with the company for nearly five years.
Additionally, news surfaced that Digg was gaming its own system, ostensibly to favor certain partners. The company had allegedly used fake accounts to upvote certain stories. While Digg came out and said these accounts were only used for testing purposes, the damage had already been done.
By February 2011, Reddit had managed to overtake Digg in terms of traffic. A month later, Rose announced his resignation from Digg. Days prior, reports had emerged that showed him not using his own Digg account for weeks or months at a time.
To keep the lights on, Digg, in July, raised a round of bridge financing worth $5 million. The funding was necessary to settle a $1.5 million outstanding debt with Silicon Valley Bank. In August, Digg had managed to completely restore version three. Unfortunately, nobody really cared anymore.
While the company continued to add new features, such as Newsroom, a new section of the site that features automatically curated news content on specific topics, it didn’t really move the needle anymore.
In July 2012, after months of trying to survive, Digg announced that it had been sold after all. The total price of the acquisition was equal to about $16 million and split up into:
- $12 million for the Digg team paid by the Washington Post
- $3.75 million to $4 million from LinkedIn for around 15 different patents (such as the “click a button to vote up a story” patent)
- $500,000 and $725,000 paid by Betaworks (which incubated GIPHY, amongst many other apps) for its remaining assets, such as the domain, code, and data
However, this wasn’t the end of Digg. Betaworks, soon after the acquisition commenced, announced that it would relaunch Digg. On July 31st, 2012, the new Digg was unveiled to the public.
The new Digg had more of a Medium appeal by visually promoting stories. On top of that, Digg’s voting logic had been completely removed. Instead, its new ranking algorithms were taking a mix of social and behavioral data, such as Facebook or Twitter metrics, into account.
The Betaworks team continued to add new features and products to the mix, including a dedicated iPad app as well as an “Apps We Like” section. The latter even allowed them to make money through one-time payments of apps that would like to be promoted.
The team also took advantage of the failure of others. When Google shut down its beloved RSS reader in June 2013, Betaworks launched its own Digg Reader within the website and mobile app. In 2014, the company even began to introduce its own original content, a move away from simply sharing external sources.
Across 2015, Digg added Digg TV, which enabled users to watch videos on the platform. In November, the company raised a “Series A” of $4 million and named its COO Gary Liu as its newest CEO. Andrew McLaughlin, a Betaworks managing partner who had been acting as CEO since its acquisition, moved to the role of executive chairman.
Over the coming years, Digg continued to add some new features, such as chatbots on Facebook and Slack as well as raising money from USA Today.
Then, in April 2018, ownership changed hands once again. BuySellAds, a Boston-based advertising company, purchased Digg (including all technological assets as well as its editorial team) for an undisclosed amount.
These days, Digg continues to surface its own curated stories as well as external news sources – just not with the relevance it once had.
Why Did Digg Fail?
Digg failed because of poor product decisions, rising competition from other platforms, internal problems amongst its staff, as well as users trying to game the system for their own gain.
Let’s take a closer look at each of these reasons in the section below.
Poor Product Decisions
The biggest reason why Digg ultimately failed were the poor product decisions made by its founding team.
Most notably, its introduction of version four alienated a significant number of its users. The redesign simply changed or even removed many of the previously beloved features.
On top of that, Digg also began to favor publishers over actual human users. For instance, it allowed them to auto-submit their news stories via Digg’s API, which in turn led to an overflow of their stories.
As such, publishers could essentially dictate and push the news stories that they wanted to have exposure to. The whole premise of Digg was that users and independent moderators would take care of the curation to only surface the most interesting and relevant stories.
In the past, Digg had also made some other questionable product choices, such as the introduction of its Digg Bar, amongst others. However, due to the superiority of its product and the lack of alternatives, it never really led to any significant exodus.
Unfortunately, when v4 was introduced, the competitive landscape had completely shifted – a topic we’ll cover in the next chapter.
Competition
Another reason for Digg’s demise was the increasing competition it faced from both social media platforms as well as other news aggregation sites.
On the one side, Facebook slowly began to take the world by storm. As a result, users began spending more and more time on social media sites.
Facebook raised close to $2 billion in funding before it went public in May 2012. This, in turn, enabled the firm to weather the economic downturn and keep on investing into the core platform.
The capital also enabled Facebook to scoop up the world’s best engineers, which are mission-critical for any type of internet business.
Digg tried to counter this by introducing various social features, such as the ability to follow other users, yet the experience on Facebook was just so much better.
Around late 2008, Twitter also emerged as a meaningful competitor. More and more people began using it to receive and consume news (apart from being able to better engage with others through tweets).
At the same time, there was always the looming shadow of Reddit, which had launched a few months after Digg.
For the longest time, Reddit struggled to compete against Digg, in large parts because it had been under corporate ownership. Condé Nast had acquired Reddit back in October 2006.
However, Reddit continued to stay true to its user base despite pressure from its corporate overlords. Co-founder Alexis Ohanian also spoke frequently to the community to explain any change it was undergoing or the decision it made.
For instance, when Reddit needed some cash to fix its site in the summer of 2010, the community responded by paying for 9,000 subscriptions in just 10 days.
Interestingly, Reddit has since reversed course and adopted its business model strategy. In an effort to lure in more advertisers, it has begun to take a tougher on questionable content.
When Digg had its version four fiasco, Reddit was essentially at the right place during the right time to scoop all those users up. It hasn’t looked back ever since.
On top of that, more niche communities, including 4chan and Hacker News, began popping up. 4chan, for instance, became the place for anyone that was simply too radical for Digg.
Internal Turmoil
Just months after Digg was launched, co-founders Adelson and Rose had also incorporated another company called Revision3.
Revision3 acted as a production studio for Rose’s Diggnation, the weekly podcast Rose hosted together with Alex Albrecht. In September 2006, they even raised $1 million in funding for Revision.
Over the coming months and years, Rose would launch a variety of side projects, such as Pownce, a file-sharing application that presaged Dropbox, which would effectively turn his attention away. He wasn’t really to be seen in the office and busier with building up his own brand.
In 2009, he co-founded WeFollow, a directory for Twitter. In late 2009, Digg acquired WeFollow for an undisclosed amount. Allegedly, Rose made about $6 million from that deal. This form of preferential treatment obviously impaired morale at the company.
To add fuel to the fire, Rose came on Leo LaPorte’s ‘This Week In Tech’ podcast and threw some major shade at his employees.
“We were growing so fast that our solution was throwing warm bodies at the problem,” he said. “We got a lot of B and C-grade talent, they bring their C and D-grade friends in, and you have a big challenge on … bringing in new talent.”
The whole fiasco was amplified by the fact that Adelson and Rose had negotiated a mutual protective clause, which would prohibit them from being fired without the other’s consent.
Another problem was Adelson’s inability to ship version four of the platform (which, in hindsight, should have probably never been released). Digg had even paid him to move to San Francisco where Digg was initially headquartered.
Adelson struggled with that move, which led to a significant decline in performance. Rose eventually decided to not exercise his veto, which led to the firing of Adelson by Digg’s board. The board also gave Rose free reign to fire anyone associated with the version four implementation.
As previously stated, v4 ultimately ended being the nail on Digg’s proverbial coffin. The internal turmoil that ensued previously still played a big part in it.
Users Gaming The System
Lastly, Digg also crumbled because some of its users had repeatedly gamed its system. Oftentimes, they received bribes in the background.
For instance, one user reported that he or she was able to get stories to the top of its homepage at will.
The user would then charge anywhere between $300 to $500 per submission, dependent on the quality of the article that was being promoted.
Obviously, this represents quite a poor user experience (on top of the constant moderation that Digg had to invest in).
Consequently, users would lose trust in the authenticity of the submitted stories as well as the platform at large.
