The Future of Web Apps (FOWA) conference this week and Kevin’s presentation “The Future of Crowd Generated Media” got me thinking about how long Digg might last or stay relevant.
Granted, Jason Calcanis wrote a month ago about how Digg would “die a death of 1000 cuts”. He is right that they own the “Young Tech Male” or YTM demographic and it is hard to go beyond that group. I subscribe to Netscape and the quality of articles are dramatically different. Netscape has far fewer votes but the news is real and relevant (their interface just needs work).
The death of Digg will not be 1000 cuts but because of its failure to extend and protect its brand. So much time has been spent on covering them and how cool they are that they have ignored the fact that there is no reasonable way it can meet its revenue goals.
Jason does a good analysis of the deal and I agree on the valuation. To quote directly:
“The real challenge for Kevin and Co. at digg now is that they probably raised their $8.5m round at 60-80M post-money. That means that the latest round of investors are going to look for 10-20x that amount as an exit. That’s a 600M -1.6B exit. That means they have to get to $30-50M in revenue. That means that Kevin is right when he says they have no interest in selling the company–they’ve got 4-5 years of work to get to those revenue numbers… start building the sales for now because to hit those numbers you need a 20-person sales team.”
Kevin Rose says that they have not interest in selling and that is smart. Unfortunately, in 4-5 years Digg will be irrelevant so he has about 1-2 years to make it work for an exit. You are seeing the beginnings of chinks in the armor. Friends list or no friends list, spammers, censorship, gaming the system and a lot more. Digg did not invent “social voting”, Slashdot did and Digg only got popular because the YTM saw this as a better venue to troll and trash each other. Their community is powerful (900K as of this writing) and the “Digg effect” is far reaching for what geeky things they find interesting.
In fact, every new site that adopts “social voting”, Netscape included, has been profiled as “taking the Digg approach”.
So is Digg going to become a verb like Xerox or Tivo and lose its brand equity?
In order to save this company and keep it going here are the five things I would do in the next 12 months to maintain Digg’s leadership:
#1 – Don’t fight the Digg Clones – Own them – There are Digg clones popping up all over the place. Why not screen them and make them niche sites within the digg community. Similar to a blog network (like B5 Media). This will create a niche army of targeted sites. Digg has created a brand for the Young Tech Male so it is going to be near impossible to break away from that perception. It needs this to stay on top.
#2 – Do a deal with MySpace – These are your future users and huddled masses looking for ways to make MySpace more relevant. The Digg model for artists, MySpace blog entries and news could add a whole new dimension to the ugliest site in the world. The revenue share could be gigantic.
#3 – Create a relevance metric for contributors – We should know that there is more weight on a submission from a 50 year old PhD with expertise in that topic than a pseudo-intellectual 16 year old.
#4 – Hire topic editors – Now, we don’t want to run the risk of paying Digg members to submit. This is quite the opposite. We want new people who can help monitor and own a topic to add value, prevent bias and . Social voting is great but there must be oversight or the “Wisdom of Crowds” will turn into the “Wisdom of Mobs”.
#5 – License the Digg software to major news outlets and Fortune 500 companies – Let’s face it, traditional media can’t keep up. Some are just now finding blogs and a limited few are experimenting with the Social Voting/Digg approach. Why not have Digg show them how to do it and take ad money and license revenue from the deal? Dell’s new site should have been running a Digg system feeding back to the mothership. In this case, it just borrowed the concept, baked it up and served it to customers. Digg not included….
Otherwise, if things like this are not done in the next 12 months, Digg will be outdone by a site that is cooler and sucks the core “Diggers” to the new site.
About Steve Fisher: Editor of the blog Venture Files and a veteran of the dotcom bubble and bust, Steve Fisher is a serial entrepreneur with one successful venture and one spectacular flame-out under his belt. He has the scars to show anyone who asks. Steve is currently CEO of The Slipstream Group, a a software firm focused on providing social networking and supply chain technology for the travel industry. He is also doing research for a new book on how people and teams innovate within an organization by finding the rebel within themselves. He can be reached at Steven_Fisher@Yahoo.com.