5 Things Digg needs to do or it will die in 2008

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.

Related Digg Week Entries

Social Networking 4.0 – Meta Social Networks

Social Networking has gone through three phases so far and I firmly believe that we are at the beginning of the fourth phase.

I refer to these first three phrases from Dave Hornik’s seminal blog entry “Social Networks 3.0” written in December 2005. I accept his interpretation of the first three phrases as follows:

Social Networks 1.0 - Group communications (i.e., AIM, ICQ, eGroup)
Social Networks 2.0 - Basic and Broad Social Networks (i.e. Friendster, LinkedIn)
Social Networks 3.0 - Experience based and more niche focused

Unfortunately, this has left us with a multitude of social networks that just make the noise much louder and they will surely fail because the are selling to the echo chamber and not doing something innovative.

So where does that lead us?

With Om Malik’s post “Are Social Networks Just a Feature?” it got me thinking as to how things are starting to froth to the point where they either need to converge, consolidate, commit suicide or connect. Marc Canter is one person that has it right and has put the tools in place to enable your personal social network or define a niche one with a white label solution. Now this could contribute to the noise, but on the other hand it could allow people to be in one place and aggregate their social network memberships and relationships.

With the recent press coverage of social networks finding new growth with APIs there is the beginning of a ground shift that over the next 18 months will lead to Social Networking 4.0.

So what is Social Networking 4.0?
Social Networking 4.0 is what I call Meta Social Networks. Om is right that tools that build this as a feature will exist but I don’t think many have the desire or sufficient motivation to build a MySpace. I believe that this will lead to increasing the value of intranet systems and back a few years ago when “portals” was the big buzzword, we used to call this concept “Enterprise Expertise Portals”.

The extension of these API’s will allow not only wicked cool Mashups (that is for a later post) it will allow some smart enterpreneur (HINT: FREE BUSINESS OPPORTUNITY HERE) to create an identity portal that allows you to manage your profiles on each network and all the details, yet respecting the dotted lines – FOR EXAMPLE: keeping your Goth Emo profile on MySpace separate from your professional business resume on LinkedIn is a necessary thing. Unless you wanted to let your business colleague know about your penchant for black and finding everything so depressing. Then again, they might already have a clue….

So eventually your “Identity Portal” could use various plugins and mashup API’s to take the social networking sites to another level.

This actually leads us full circle to Om Malik’s post of social networks becoming a feature. But in my opinion they would be called foundation and not just a feature.

Still, there are some challenges to overcome:

  • Multiple Identities – This could be overcome with an identity portal but standards like OpenID could help move this along.
  • Social Network API standard – It is good some are opening up. But there should be some standardization of basic profile data so it is easier to work with when connecting to profiles.

I look forward to hearing the communities thoughts on this and if it might work, what other challenges and what “Identity Portal” you might build.

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