People just don't dig Digg as much as they used to, it seems. In an amazing fall from grace for a company that helped pioneer the social-media boom, the Digg tech-news sharing network was gobbled up this week by Betaworks for a price reported by The Wall Street Journal to be $500,000. The company claims the deal was higher but hasn't disclosed the price.
Betaworks will merge Digg with its News.me service.
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"Betaworks has acquired the core assets of Digg," said Betaworks in a company blog. "Digg is one of the great Internet brands, and it has meant a great deal to millions of users over the years. It was a pioneer in community-driven news."
The Journal, citing inside sources, said Digg received higher offers from other concerns but accepted the one from Betaworks because it had the best plan for reviving the brand as it was obscured by the rapid rise of Facebook and Twitter, and a large portion of its staff had been poached by the Washington Post for its own social media subsidiary.
"We are turning Digg back into a startup. Low budget, small team, fast cycles," said the Betaworks blog.
It's unclear whether Betaworks will maintain the Digg name when it's merged with News.me.
"Ask 10 consumers what Facebook is and they'll tell you," said Gartner technology analyst Michael Gartenberg. "Ask the same [people] what Digg is and they'll say, 'What's Digg?'
"There's a point where things move beyond the technorati to the mass market and therefore succeed. That's why iPod is still around and Zune a footnote."
Digg derives its name from the ability to drive stories up or down on the site by voting. It was founded in 2004 -- the same year as Facebook -- by Kevin Rose, Owen Byrne, Ron Gorodetzky and Jay Adelson, but Rose was the face of the company, featured on the cover of Businessweek in 2006 as "leader of a new brat pack of Silicon Valley entrepreneurs." Rose left the company last year and now works for Google.
Though never as popular or lucrative as Facebook, Digg does offer users an option Facebook never had -- the ability to "dislike" stories posted by other people by clicking a thumbs down icon. Facebook tries to be ever-positive with its like-it-or-do-nothing system.
At the height of its popularity, Digg raised $28 million in venture capital, was valued at $154 million and was once in a rumored negotiation with Google for $200 million.
"To date, we've had over 350 million Diggs, 28 million Story Submissions and 40 million Comments," said CEO Matt Williams on Digg's blog Friday. "We're extremely proud to have helped pioneer social voting on the web.
"Over the last few months, we've considered many options of where Digg could go, and frankly many of them could not live up to the reason Digg was invented in the first place -- to discover the best stuff on the Web. We wanted to find a way to take Digg back to its startup roots."
He noted that News.me "has an iPad app, iPhone app and daily e-mail that delivers the best stories shared by your friends on Facebook and Twitter. Digg will join a portfolio of products developed by Betaworks designed to improve the way people find and talk about the news. Betaworks founder John Borthwick will be the CEO of the new Digg."
Changes to the site, including a massive reboot in 2010 intended to prevent overuse by individuals and eliminate duplication, are believed to have eventually cost Digg popularity.
"I would be surprised if Digg the brand has a viable future," said digital media analyst Rebecca Lieb of the Altimeter Group.
"Digg's fire sale is the most recent in a long series of meteoric ascents and even faster flameouts of digital media properties. AOL, Yahoo and MySpace are all examples of behemoths that once dominated the digital landscape and now are shadows of their former selves."
Lieb said that unlike well-established institutions such as Lehman Brothers that can last a century before shutting their doors, "we now see the success/failure cycle occur in "Internet time." Digg is the latest, but likely not the last such casualty."