The innovative news aggregator site has the big boys queueing up. Dominic White reports
There aren’t many places in cyberspace where you can find stories about Super Tuesday, CIA interrogations and high-speed photography next to a video of man having a tennis ball fired at his testicles. But Digg.com is one, if the mid-week running order on its homepage was anything to go by.
Digg’s eclectic cocktail of serious politics, tech news, celebrity gossip, conspiracy-theorising bloggers and puerile video has got millions hooked. It is the runaway leader in a wave of web-only news sites that have replaced news editors and sub-editors with the readers themselves, who vote to move stories or clips to the front page of the site, or to bury them.
Digg attracts 24m unique users a month from a demographic dominated by 18-40-year-old tech-savvy males with money to spend. Advertisers are salivating, traditional news companies are looking over their shoulders and Silicon Valley bankers are tipping Digg as one of the big takeover targets of this year.
Last year, Microsoft struck a deal to sell banner adverts on Digg in a three-year agreement which upset some of Digg’s many left-leaning, anti-establishment users.
Some think Digg could be next on Bill Gates’ shopping list after Yahoo! but Digg chief executive Jay Adelson steadfastly refuses to be drawn when probed with questions about potential M&A. “We are growing and we are very happy with the relationship we have established with Microsoft,” says the 37-year-old Californian, whose last job was taking $2.5bn data-centre giant Equinix to market. “We have a fully funded business plan. We don’t require capital in our opinion to reach profitability.”
Digg’s growth story is remarkable even by Web 2.0 standards. It began life in September 2004, the brainchild of web pioneer and cable TV presenter Kevin Rose. Rose, now 30, developed an algorithm that would allow web users to control and promote news and other content on a single site, without external editorial control. Within weeks he realised that, combined with a social-networking element, the site had serious commercial potential He hired a clutch of net veterans, led by Adelson, to help turn Digg into a business.
“Kevin was inspired by small enthusiast news-aggregation sites [for technology types] such as SlashDot and MacRumors,” says Adelson. “But he wanted to take it to the masses.” From the largest online news destinations such as The Wall Street Journal and CNN to the most obscure blog, Digg users can recommend - or “Digg” - their favourite content and provide links to those sites. To stop users rigging Digg, the closely guarded algorithm is constantly updated.
Rose, who started the business with $1,000 of his own money, remains the largest individual shareholder, but he has been backed by a Who’s Who of Silicon Valley investors, including eBay founder Pierre Omidyar; Facebook backer David Sze at Greylock Partners; social-networking pioneer Reid Hoffman and Netscape co-founder Marc Andreessen.
Even with all that financial muscle, Digg remains a low-cost operation, employing just 40 staff. It is spared the massive infrastructure costs of operations such as video-sharing site YouTube, now owned by Google, because Digg merely provides links to other sites.
Ian Maude of industry-watcher Enders Analysis says Digg’s cross between news and social networking sits in a sweet spot on the web. “News is a very good subject to pick because it has a very high appeal,” he says. “Our research shows that 70 per cent of internet users in the UK regularly visit news websites.”
Despite its US base, Adelson says London is Digg’s number one city in terms of “user density”, adding that 7 per cent of all of Digg’s traffic last month came from the UK.
Not surprisingly, Digg’s growing power has caused concern among established news organisations - until recently unused to competing for readers’ attention with content from random individual bloggers.
But Adelson insists Digg has a symbiotic relationship with traditional publications. “It took a good six to 12 months for people to understand, but once they got it they realised we actually drive a tremendous amount of new users to their online publications, so we are helping expand their reach.
“Digg is levelling the playing field but quality still matters: so while we believe it’s important for Digg to allow any author to be exposed, our users recognise that when reporters get paid and have training, it shows.”
Most major news sites - from The Washington Post to CBS to The Daily Telegraph - now feature a Digg button, which readers can click to recommend articles to Digg’s community. These generate more than 1bn page impressions every month, says Adelson.
But Digg’s “wisdom of the masses” approach has backfired before, exposing the tightrope its business model walks between freedom of information and litigation. Last year, under pressure from the owners of the technology behind next-generation DVDs, Digg threatened to take down stories featuring a way to crack their copy protection.
The users staged a rebellion by voting en masse for the stories to stay up. Rose and Adelson reversed their decision, and Rose wrote on Digg’s company blog to explain why. ” You’ve made it clear. You’d rather see Digg go down fighting than bow down to a bigger company. We hear you, will deal with whatever the consequences might be. If we lose, then what the hell… we died trying.”
Digg didn’t die, and now Adelson and Rose are looking forward to putting a host of new personalisation features on the site. But perhaps the biggest challenge, as Digg gets bigger, is to maintain the backing of the site’s so-far loyal - but sometimes volatile - user community.
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