Updated
Digg, the news site that lets users rank stories by voting, has raised $8.5 million in fresh financing from existing backers, putting to rest for now speculation that it might sell to a bigger media player.
The latest financing was reported by VentureWire (sub required) this morning. According to the report, the funding comes from previous investors, Greylock Partners and the Omidyar Network, which is run by eBay founder Pierre Omidyar.
Statistics have become a major sticking point for Digg, with the company saying in October that it has 20 million users, while conservative measurement sites like Comscore say Digg has a mere 1.3 million. VentureBeat reported on the statistics mess here. The confusion is significant because it points to uncertainty about just how popular the site is. Supporters say Digg is the way of the future, riding the “Web 2.0″ wave, whereby users get to interact with and contribute to news filtering.
When measuring Digg’s performance, mainstream news publications continue to rely on statistics from Alexa, which are notoriously unreliable because the site draws data from a very small base of people — Web administrators who have downloaded an Alexa toolbar on their computer, people who are more likely to be “geeks” playing with sites like Digg. BusinessWeek started off the trend, with a much hyped story, citing Alexa to suggest Digg was nipping on the heels of the NYT. The Mercury News today points to Alexa as evidence Digg is a top 20 U.S. site. VentureWire points to Alexa to say it is a top 100 global site. There’s little question that Digg has grown robustly, however. Compete, another free measurement site, puts Digg’s ranking at 144. VentureBeat wrote about Compete’s methodology here (scroll down).
Digg’s limiting of investors to insiders may be more evidence that Digg’s progress is too controversial for outside investors to agree on investment terms — insider investors presumably argue that Digg is worth a lot more than outsiders do. However, we’re not certain about this. It is normal for venture capitalists to let an outside investor come in and set an independent value for a company. But there are exceptions. Insiders may simply feel that Digg is worth so much they don’t want to let outsiders participate. (Update: We’ve just talked with Greylock investor David Sze, who says Greylock and Omidyar weren’t interested in having an outside investor dilute their holdings, and that Digg’s management didn’t want to waste time trying to raise money at a higher value from other parties. Sze said Digg’s usage continues to grow, and is confident that Comscore is undercounting it. Comscore ignores Digg’s RSS users, which could account for between 30 and 40 percent of all users, he said. Comscore also ignores international usage. In all, Comscore undercounts Digg’s traffic by up to three or four times, he says.)
Digg recently integrated new media to its site, including video.
However, the site continues to get gamed. A top “digger” recently admitted a marketer had convinced him to digg a story about the marketer’s company, JetNumbers, in return for free services — just the latest evidence the site is being gamed by spammers. It is remarkable, therefore, that chief executive Jay Adelson dismisses suggestions his company has been gamed. “First of all, I don’t believe it happened,” he tells VentureWire, though VentureWire may not be providing the full context of his remarks. VentureWire apparently did not raise the JetNumbers or other cases. Digg is not profitable, Adelson added.
Update: Adelson comments below that he was taken out of context.
Update: In other remarks, Greylock’s Sze said Digg is unlikely to be sold anytime soon, and is more likely to focus on partnering with other sites that have expressed interest in integrating Digg’s format into their own sites. Music sites, for example, are interested, he said. The non-tech news parts of Digg’s site are bigger than the tech news, he added. Finally, regarding the gaming of Digg, Sze said the company is busy putting in safety measures to stop this sort of thing happening — and that Digg can continue to grow despite being targeted by spammers, just as Google and eBay did.
Tags: co:Digg, inv:-Omidyar-Network, inv:greylock-partners, people:Jay-Adelson25 Comments
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Ian Bell said:
I noticed in your October mention of Digg on Businessweek, that TechCrunch was supporting the Alexa/Digg numbers.
One thing worth mentioning is that Tech Crunch has an Alexa rank of 505 (as of this writing): http://www.alexa.com/data/details/traffic_details?q=http%3A%2F%2Fwww.techcrunch.com%2F&url=techcrunch.com
An Alexa ranking of 505 for a mere 2.4mm pageviews is pretty amazing: http://www.sitemeter.com/?a=stats&s=s26techcrunch&r=25
I think it goes to show that anyone with ingenuity can game Alexa for a benefit.
In the case of Digg, I think taking $8mm more in funding is a very rash decision. They are literally “Digging” themselves into a deeper hole here. Now they will need to sell the site for more than previously expected just in order to walk away with some cash in their pockets.
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Jay Adelson said:
Regarding context, I was not responding to the specific question of whether or not JetNumbers did or did not accept money for a submission. I was responding to a question about “pay for digg sites” influencing Digg story promotions, which to date, I believe we have successfully prevented.
I believe people try to game Digg often. Our community and systems, we believe, successfully thwart those efforts.
So yes, I do think my comments were taken incorrectly out of context.
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Marshall Kirkpatrick said:
Congrats to the Digg crew. I can’t wait to see what they do with the dough - interesting things to come I’m sure.
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cg said:
i find it funny that a company raises more money in this round than I’d even be willing to pay for the ENTIRE company.
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Graywolf said:
It’s quite funny how digg refuses to acknowledge it has problems. I recently published a detaled plan on how to abuse digg that they completely ignored
http://www.wolf-howl.com/grayhat-seo/how-to-be-a-dirty-digger/
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Bill said:
Digg get’s gamed all the time. That’s why you guys kicked out various users for digging their friends stories. That’s why you banned people for sites like user/submitter.
Don’t be a morons like the guys at facebook and try demanding an insane amount of money. Take a decent ammount and invest it then.
Or just keep being the tools you guys act like now. I can’t wait to see the company sold and the VC’s get all the money, and poor Kevin gets enough to buy a new look (and personality).
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Del said:
Digg is a great idea, but is handled poorly. It seems like most of the “team” at Digg has a great understanding on how things need to change, but are covering up the truth. Adelson appears very withdrawn during this new wave of Web 2.0 and Digg. Perhaps that he’s only in it for the “money” (once the team focuses more on spam, etc.) and will continue to box this idea up. I feel Kevin (Rose) places his idea into the wrong hands and is in need of a serious overhaul.
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Chris said:
Congrats to Digg and company. Hopefully they’ll invest the money well and not simply stuff their wallets with pay raises and unneeded body/staff. :)
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Nickie said:
Digg is for geeks but geeks don’t click ads. Digg has to reach out to other audience to increase its cashflow.
Digg may have to rethink its revenue generation model - ad-supported model and “build and flip model†don’t seem to cut it. Maybe their SEO forte will do some magic:)
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Avi Muchnick said:
I just published a new way of evaluating Web 2.0 traffic called “orbital theory”. Putting this kind of theory into place would show exactly why a site like Digg is worth only whatever it’s *active* member base is currently up to.
If you want to critique the theory, it’s here:
http://worth1000.wordpress.com/2006/12/28/an-introduction-to-orbital-theory-understanding-and-putting-value-on-web-20-communities/ -
Leon said:
Unless they got some bright ideas on a new business model, raising that amount of funds is pretty much useless. The innovation I see in Digg throughout this year can be achieved by a handful of engineers.
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Roman said:
I agree with DEL, DIGG is a great idea with poor implementation, however. The quality of diggs is not consistent and the turnover of stories on the site is too rapid. Unless DIGG is able to figure out a substantive way to capitalize on the DIGG concept and grow traffic, within a year or two they will fall by the internet wayside.
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Mike Cleaver said:
Obviously we are talking about some pretty bright people. Rather than assuming they are making a stupid move I’d be starting to think about what kind of huge idea they’ve come up with. IMO the digg model has reached its limit and now they’ll be working on something completely different.
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Ferodynamics said:
Eventually Diggers will grow up and switch to TechMeme.
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@ Bill - “Don’t be a morons like the guys at facebook”
Yeah…or that retarded guy from Craigslist…you should really just let all of the corporations of the world run everything as they see fit. Just roll over…it makes life so much easier, right? -
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