Diggs version 4 success story

Digg didn’t fail it succeeded

Many have claimed the version 4 redesign of Digg.com was a disaster. I say otherwise and heres why:

Under version 3 of the website, they clearly had the numbers. They had an at times frankly enormous amount of traffic and yet an incredibly small amount of advertising revenue in comparison. I’d suggest this was for two reasons.

Firstly, the users of Digg were advanced computer geeks and teenagers. These guys had learnt over time to click only on those things worth clicking. They stay for the comments and chat functionality and lead purposeless, aimless meandering lives. Many came from 4chan and similar bowels of the internet world (stay awesome :) )

Secondly, I can’t remember.

Then version 4 of digg happened. It was a community disaster and drove away “loyal” digg users in droves. and I mean DROVES. Everyone went over to the (at the time) shiny and functionally difficult Reddit.com. Many enjoyed the more serious tone of conversation and were refreshed by the ACTUAL REAL CONVERSATION that occured on reddit. That is, before the digg crowd got there.

Looking at the state of reddit now, just 5 or so months after the Digg.com 2010 incident it is clear that the victory party is over. Reddit is now just like digg at its worst. Memes and imgur links litter the front page.

Then their is the marketing machine working awya on reddit. They’ve realized how to game the system. Using shills from unknown PR firms, or quite possibly outsourced indian freelance labor, to vote up stories supporting causes or celebrities. In particular the recently highlighted incident regarding Rebecca Black on Reddit as well as the well known Climate change lobby and wing organizations.

But enough of reddit for now, let us get back to the tale of Digg.com. So what exactly happened in November of 2010 with that Digg redesign to version 4? What did it mean? Why did they not listen to their loyal fan base? One simple answer as far as i’m concerned…MONEY out of a beaten horse.

Exit strategy had hit a roadblock. The only thing left to do with Digg was to milk it dry and try to recoup costs. How do you do that? Maximize revenue (thats money in) and cut costs (thats money out).

So lets take a look at a simple economics lesson now. For any website, their are 2 main costs incurred in day to day business ince the sweat equity of building the thing is accounted for. Those major costs of doing business of a startup are:

  • STAFF COSTS
  • SERVER COSTS

Server costs cover anything to do with the cost of serving a website to the visitor and staff costs are obviously the costs of staff to babysit the project.

Now back to the particulars of the Digg situation. So probably mid 2010 Digg would have decided its time to beat. Staff cuts had to happen. Kevin Rose had hired most of his friends by this time and it was well known in the Venture capital world that Digg as a concern was overstaffed. Thats the problem with hiring friends. Its very difficult to let them go. Don’t make that mistake. Eventually of course, significant staff cuts were made at Digg during the end phase.

Then you have the server costs. How can you cut these? you do need to run the servers right…you need to show those visitors the website they request. Well, you get rid of all visitors who do not generate revenue, since they are effectively a cost to your business. Yes, you will lose SOME revenue by cutting them, but by and large, the revenue will dip a little, with the costs to the business dipping quite significantly. That is why I think Version 4 was intentionally bad. I think it was a cleverly plotted system of events to cause an outflux of “bad” non revenue generating visitors, resulting in a reduction in costs at Digg. and it worked. They’re on Reddit.com right now and its getting worse.

There’s nothing wrong with that crowd of unemployed programmers and over informationed teenagers, its just that they don’t spend very much. So they’re difficult to advertize to. Unless its a hipster model 2000 or some artificial “cause-of-the-week” asking for money. Then thats cool, which probably explains why kickstarter.com is doing so well…

So, following the bad customer cuts and the staff cuts, what else can be done to milk a startup? Well, you could always INCREASE REVENUE! and digg certainly has attempted that one too.

Their are two ways for a startup like digg to make more money, those are:

  • ADVERITISNG
  • SPONSERSHIP

Allowing companies to add RSS style submission feeds directly feeding into the digg frontpage, as well as allowing more specialized advertising on Digg has meant and visitors are more likely to convert to a sale. This is great for digg and certainly would have increased revenue.

So how about now? Well, that increased profitability of the, at one time, startup must certainly be nice, but then money always is right?

With the social atmosphere gone, its now just another website on the web. Some of you might still have that bookmark lying around somewhere, most have deleted it forever. Either way, its not long now before its long forgotten and you’ll see the domain name selling at auction for $100 on Go daddy as a going concern.

I don’t think Reddit is too far behind either…just sayin’!


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