Stop Making Fun of Digg

The purchase of social media pioneer Digg at a bargain price by Betaworks was met in the press with the sideways glances and snarky headlines that accompany a bad Internet omen, or just a former celebrity careening out of control. “Digg dug its hole” said USA Today. “Betaworks Digs Under Sofa Cushions, Finds Change, Buys Digg” goes PC World. Even the Wall Street Journal, who broke the news, couldn’t help sounding pretty dour: “Once a Social Media Star, Digg Sells for $500,000.” Meanwhile, Twitter was pretty brutal, and nobody would shut up about that 2006 BusinessWeek cover story labeling Digg founder Kevin Rose as a leader of the new “brat pack of Silicon Valley entrepreneurs” (above) and boasting about Digg’s ballooning value.

But as the hours following the initial WSJ story revealed, the sneers about Digg’s low selling prices were a little bit gratuitous. In fact, the price tag for Digg amounted to much more than half a million dollars. As TechCrunch’s Alexia Tsotsis pointed out in a Thursday night blog post, the social news site was sold off in parts over the course of the past few months. Earlier this year, Digg sold 15 patents to LinkedIn for between $3.75 and $4 million, and the Washington Post paid $12 million for about half of the company’s engineers. So in a sense, what was left to sell to Betaworks was just a fraction of the company.

Furthermore, the actual price tag was apparently much high bigger than the reported $500,000 figure. (Former) Digg CEO Matt Williams told AllThingsD, incidentally a sister publication of WSJ, that “the overall consideration is significantly larger,” since the deal involved a combination of cash and equity in the new venture that Betaworks will be launching with Digg and its own social news site, News.me. Betaworks said in a blog post, “We are turning Digg back into a startup. Low budget, small team, fast cycles.” None of the Digg team will be moving to Betaworks to help out with the process.

None of this makes up for the fact that Digg has fallen far. Over the past few years, the company burned through $45 million in venture capital from premiere VC firms like Greylock Partners. A round of funding valued Digg at $150 million in 2008, just a few months after Google nearly bought the site for $200 million.

Inevitably, however, the numbers behind the sale don’t tell us as much as the collective reaction does. It seems mean of everybody to ridicule Digg’s plummet, but it does lift the veil of venture capital-fueled delusion, and says something about the true value of social networks. The Atlantic’s Alexis Madrigal says it succinctly. It’s not the platforms or the corresponding technology at all that’s valuable. It’s the users, and all the data that comes with them. With the chance to start from scratch, Digg could reincarnate its earlier success. News.me is pretty heavily focused on mobile, today’s equivalent of the new media frontier Digg conquered nearly ten years ago, so there’s some opportunity out there. Together, the two could even build something revolutionary. All they have to do is convince people to use it.