Digg Sells for $500k and Becomes a Cautionary Tale: Listen to Your Users

Digg, once the most talked about social link sharing sites on the web, has just been sold, for a fraction of the valuation it once held. The company is selling for $500K to Betaworks, a New York technology firm. This is a far cry from its position 4 years ago, when then CEO Kevin Rose tried to shop around to sell the company for around $200m.

The news does come as a surprise, but only because of the piddling sale number. Everyone knew Digg had suffered a steep decline in user activity after they released their “Digg 2.0″ platform, but nobody would have guessed they’d suffered so badly. Digg fielded a few offers before choosing Betaworks, and the Wall Street Journal indicates that Digg actually had higher offers that they turned down because Betaworks had a better plan to revitalize Digg.

Digg was rolling along pretty steadily until 2010, when they unveiled a new design that let companies create their own pages and seed the front page – thereby undermining the democracy of the site. Digg had not realized just how fragile a formula they had developed, and their attempt to commercialize the entire service failed in two ways. First of all, they completely ignored reams of users who made it very clear that they would leave the site if Digg commercialized the front page. Secondly, the new model wasn’t even that effective – companies could easily flood the front page with their own links and even users who supported the change wondered whether the site was broken. Digg lost half of its user base that year, and never stemmed the bleeding.

As a former Digg user, it’s aggravating to see how the mighty have fallen. They had everything in their hands, and when they stopped listening to their users they made a critical mistake that cost them the entire business. Certainly, this chapter of Digg has ended, but maybe a new one will begin – but to be successful now, Digg has become the David who must take on the Reddit Goliath to win.

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