Saturday, December 30, 2006

Why Nobody Buys Digg.com?

Here we go again with lots of speculations for one of the top and most popular web 2.0 websites: digg.com. In our understanding there must be something wrong with either Digg, its business/revenue model or the momentum is simply lost, or something else.

Here are our bets on why Digg.com did not get sold so far:

1) They have looked for a price way above $150M;

2) Not profitable enough toward their claims of having 20M visitors a month, in other words too many visitors, too much popularity that seem hard to be monetized;

3) Digg.com is Slashdot.org 2.0., how much did Slashdot.org go for? $20M something...;

4) Their technology and concept is not distinctive and definitely not defendable. Too many followers and competitors, including Netscape.com. Digg set the standard, under no doubt, but it seems too many old media companies are about to build up the same technologies within their web properties which will additionally undermine Digg.com’s popularity;

5) They might have something in mind to expand to areas beyond news like digging for stuff like products, people, films, music and more, which might forced them to go for funding rather then acquisition;

6) They have new products and services in their R&D department;

7) Series B funding is known to be always the beginning of the end;

8) Digg.com was and still is widely criticized for being corrupted in getting manipulatively different news stories promoted to the home page by a handful savvy Digg.com users;

9) Geeks are not clicking on ads, as many people say, so the advertising model seems highly unlikely to be the panacea for Digg.com;

10) Digg.com and News Corp negotiations failed for one or another reason, which might have negative impact toward other potential inquirers, the situation seems pretty similar to what happens to Facebook;

11) If they wait long enough they would get more;

12) ComScore reported far lower figures than Alexa’s and Digg’s own stats. That report may cause some investors to rethink the decision of buying Digg.com;

13) Being unable to sell for $150M before the round, now that more VC money is poured in, it means that they now need to aim much higher to get comparable ROI, which might make a potential acquisition much harder for Digg.com.

Despite anything said above, Digg.com, in our view, does cost more than $150M at the very current moment, with or without steady revenues, simply because of its popularity, leadership, reach and target audience. Yet we cannot get rid from the feeling that there must be something wrong that the general public does not know about, which might have been the reason behind the decision, once the due diligence is conducted, of one or more of the potential acquirers to back off, for now.

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