Digg, the pioneering social-news site which lets users vote on top headlines, began to lose momentum during the recession because it pulled engineers from designing new site features to work on improving revenue, founder Kevin Rose said today.

Rose said that looking back, he would have hired additional engineers to handle implementing new advertising features instead, in comments made at an interview at the TechCrunch Disrupt conference in San Francisco..

Digg recently launched a suite of new features, most of which constituted playing catch-up, Rose said. Collectively known as Digg v4, or the fourth version of the site, they’re aimed at moving Digg to a more social and personalized experience. The Digg community largely lashed out at the team after the new version of Digg went live, with some users apparently flocking to its competitor Reddit, a social-news site owned by magazine publisher Condé Nast.

Rose said the site probably should have introduced the new features slowly over time and maintained popular old features until users completely migrated to the new version.

It’s unclear whether Rose’s future plans involve Digg. Rose has become increasingly active as an angel investor, putting money into companies like Foursquare and Gowalla. He also dodged questions from TechCrunch founder Michael Arrington as to whether he would be at Digg by the end of the year. And while Rose has turned down acquisition offers as high as $80 million to continue working with the site at his investors’ insistence, he said even he is a little burnt out working on the site.

“Emotionally it’s tough when you go through this crazy growth and a bunch of acquisition offers,” he said. “I like to ship product and roll out new features, when you can’t do that it’s really frustrating.”

Rose launched the news aggregator site in 2004, which has since grown to a team of about 60 and around 1.2 million daily page views, he said. Rose has always shied away from being a direct leader of Digg, instead hiring Jay Adelson (who later got the boot) and most recently Amazon.com’s Matt Williams to take the helm of the site. The San Francisco, Calif.-based company has raised around $40 million to date.

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