Someone speculates today that digg is going to take a hit from the hundreds of smaller sites that are going vertical in the social news market place. They make a really nice long list of all the social news sites (let's not call them digg-clones because delicious is really responsible for the current movement). The concept is why would folks go to digg if they could got to a more focused site in a vertical?!
Well, this argument would assume that digg is not already a vertical and we all know digg is a very specific vertical: young, tech males (YTMs). This is an amazing demographic to capture in large part because they've left TV. This means advertisers looking to reach young males are totally lost--they need digg, Engadget, videos games, and podcasts to reach these folks. TV ain't gonna do it.
That is the huge opportunity for digg: they own that vertical.
Now, the hard truth: digg is never going to go beyond this group on the digg.com domain name. Now, this isn't a digg to digg, this is just a fact of life and some friendly advice to Jay and Kevin. When you build a huge, passionate community like digg has (and Fark, Slashdot, Engadget, iVillage, and the Well have), you live and die with that group. If digg wants to go big they should start a second digg for women, and one for politics--they shouldn't do it as part of digg.
Older folks, women, folks interesting in things like politics, travel, or fashion will never live at digg because the community eats them up and spits them out when they try and participate. This same thing happens at the political blogs (think: DailyKos) and other hangouts on the web. Communities gel and you can't un-gel them--and that's just fine.
When I was working on Netscape we realized this early on when the political folks took over the homepage and ruined the experience for anyone who didn't care about politics. We decided to level the playing field and make the homepage have no more than 2-3 stories from each category. It worked like a charm and Netscape is the "general news portal with some funny stuff." We did this early and that's why it worked. digg is not going to be able to break the stranglehold the YTM have on the site--they will always be the #1 social news site for tech/YTM.
The real challenge for Kevin and Co. at digg now is that they probably raised their $8.5m round at 60-80M post-money. That means that the latest round of investors are going to look for 10-20x that amount as an exit. That's a 600M -1.6B exit. That means they have to get to $30-50M in revenue. That means that Kevin is right when he says they have no interest in selling the company--they've got 4-5 years of work to get to those revenue numbers... start building the sales for now because to hit those numbers you need a 20-person sales team.
Will digg die the death of 1,000 cuts?
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Reader Comments
(Page 1 of 1)2. That's a very good analysis, Jason. Most people seem to have missed that Digg itself is firmly in the tech vertical. However, that's still a very wide vertical, and there is probably some room for even more narrowly focused ones. Gadgets, Software, Unix, Apple, etc are one that come to mind off the top of my head. I have started a site focused on one vertical that Digg seems to be alienating right now SEOyak.com that is focusing on the SEO community.
I predict Digg's growth will slow as more specific tech verticals are exploited.
Posted at 5:44PM on Jan 5th 2007 by Toivo Lainevool
3. It's less about the way the site works than it is about the passion of the core community.
But, talk to the right people, pay the right money and you will be dugg.
Will Digg still be in its present state in 365 days time?
What would happen if an extremely popular gadget blog knocked up a Digg type clone which auto linked to the main blog posts?
What it comes down to at the moment is who has the biggest passion, which makes it really interesting.
Now, where is my Pligg script, I'm going to knock up a Digg clone in the niche of Krispy Kreme Donuts.
Posted at 6:27PM on Jan 5th 2007 by Lyndon Antcliff
4. It seems to me that Digg's audience is relatively young males, not necessarily tech. Look at Slashdot for a tech vertical. Young males is an excellent group, and as a previous poster said, contains numerous verticals.
I'm also not convinced that Digg cannot extend. Their podcast effort will be a good test, and I've already heard it mentioned on podcasts that do not target young males.
No expert, but I think a VC making an investment in an early stage company with an unproven model would expect a very high return - 20x+ - in the event the business succeeds. However, the recent Digg round wasn't really an early stage investment - this is a company with revenue, significant growth and great brand awareness. I'm sure the investors in the round would love to see 20x+, but do you believe that was their expectation when they made the investment?
TC
Posted at 7:51PM on Jan 5th 2007 by TC
5. Everytime i think of Digg i wonder how they are going to turn a real profit. I can't see too many companies wanting to buy advertising out right there, unless it's trhough Fed Media. There's no boundries to what is published, a company for instance Hewlett Packard could be spending lots of money paying for a top banner on Digg but could be completed slagged off by every user. There could be 10 negative HP stories to hit the homepage in one day, HP would have to pull the ad. The comments and the community are out of hand there's no point in even trying to establish reasoned conversation among the comments because you are usually gunned down by 100 + sub 17 year olds who think they know how every peice of the world should be. I am a big fan of Digg but i feel they have hit the wall, Kevin, Jay or whoever is the brains behind the whole thing needs to get off there ass and think up some way of trimming the fat and getting back on the rails.
Sorry for the lack of spelling - :( EEEKK!!
Posted at 2:21AM on Jan 6th 2007 by Bill
6. Creating a thousand verticals may confuse users who are reeling with overloads of information.
Mediavidea suggests building a Digg of Diggs.
http://mediavidea.blogspot.com/2007/01/creating-digg-of-diggs.html
7. I understand your point, but you are missing one crucial point.
Digg already allows you to filter news from a section you do not want.
Example if I do not want to display Politics news on the Digg frontpage I can.
So your statement fails. Digg just need to make this feature known more.
8. So true.
It's just the same for real life "communities" like bars anc clubs.
Your initial crowed will also be your end one.
Posted at 4:22AM on Jan 6th 2007 by Shahar Nechmad
9. Wow what a quick analysis is this :)
Quote========
they probably raised their $8.5m round at 60-80M post-money. => the latest round of investors are going to look for 10-20x that amount as an exit. => 600M -1.6B exit. => they have to get to $30-50M in revenue. => they've got 4-5 years of work to get to those revenue numbers...
Posted at 5:00AM on Jan 6th 2007 by Emre Sokullu
10. One of the biggest questions by potential investors in the Web 2.0 space (that is, that haven't already realized it) is, "What's your barrier of entry?" For DIGG, the narrow demographics of their user community is both a weakness and a strength. A weakness for all the reasons you explain well, Jason, but also a strength in that most of those young tech males only want to interact with people like them in this type of forum. And, that creates the barrier of entry because other sites will have a difficult time creating a similar user community because they are all already on DIGG. So, I don't believe in "death by 1000 cuts," but do agree that they will forever be a young tech male site unless they intentionally alienate those users. In other words, they are very much a vertical social news site already...
Just like you did with Netscape, Jason, as someone who is also trying to capitalize on this effect, I feel that the social news world (as well as those sites more loosely categorized as sites trying to formalize the word of mouth process) still have great growth prospects. This area is still very much in its early adopter stage, waiting for a MySpace to blow past the Friendsters (DIGG, Del.icio.us, etc.). And the key to doing that is to make it more than just about news. Like MySpace, user communities are all about identity, and most social news sites haven't capitalized on this fact yet.
Posted at 9:20AM on Jan 6th 2007 by Teddy Schroeder
13. Great article!! I believe there are ways which digg could effectivley target new audience demographics without having to launch a new domain name. I could picture a sort of biasing system. Like in your profile you could select from a list of biases that included (politics, entertainment, tech etc) and then it could automatically slant everything that way and potentially give your comments / stories more value underneath those categories.
That way if someone with a tech bias tried to troll out your political story there down vote would be less damaging.
If this was used correctly it could enable sub communities to form within the young / tech group that is currently so active there.
Just a thought!
Posted at 5:50PM on Jan 6th 2007 by Solomon Rothman
14. the last point isn't really right jason because the investors were all existing investors. they aren't looking for 10-20x on the new money. they are looking for a blended rate of return on all the money.
if they had taken a round from new investors, your observation would be more correct (although at that kind of valuation the investors are no longer 10x seekers, they are 3-5x seekers).
but i don't think the new round is going to have much of an impact on exit strategies.
they'll sell when one of two things happens. they get an offer they can't refuse, or the founders and investors lose their passion for the business and want to move on.
15. I made the same point in a recent email to Digg. Why won't they separate out some of the content an segement the noise?
Politics is lumped in with business. Many contributors are passionate about politics, yet few are so about business news - yet one has more profitabilty than the other.
The advertisers of choice avoid politics, yet it dominates the front page time and time again.
16. I don't see digg going away anytime soon. The community is comparable to slashdot, and really the problem is that the marketing community got shunned by the digg community and therefore the marketing community decides to see if they can bury digg. It's an uncontrollable community, you cannot go in there and seek out front page views for top 10 seo articles. SEO isn't digg quality, the community doesn't care about it and they certainly will react when people go out there posting "how to control digg and beat the others to the front page" any community would react!
Digg is here to stay, the community will keep it alive. I certainly wouldn't give it up, strictly for the obscure articles that I might never have caught otherwise.
The marketing community may have Matt Cutts and google tap dancing to their every whim, but the digg community decides to point you to stage right, I would much rather bow and leave gracefully rather than sit and boo the star. It just leaves a bad taste for everyone.
17. I completely agree with you. I think Digg needs to rethink its business and revenue model because there are a lot of Digg-like sites out there. It's spreading really fast even to non-Digg site like Monster, CareerBuilder and Monster.
JobLeadsCafe.com is just one example. JobLeadsCafe is a job lead sharing community where anyone can share great job leads. It's not a job board but about people helping people finding real jobs.
I see job search moving in this direction in the future.
Soliviks
18. I have no passion for Digg. It really is no better than a high school clique. We have all heard about how the stories that often reach the front page are Dugg by the same people. Digg does not show the power of democracy, it is a better example of the mob effect. People there are not generally thinking for themselves, but rather following the crowd. People often don't even bother reading the stories before posting. Digg really is not that innovative and really has very little potential to market. Face it people that use Digg are blind to marketing, ads and for the most part thought.
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1. I wrote about precisely this issue of verticles in a post here, albeit in the context of their podcast directory:
http://gizbuzz.co.uk/2006/digg-tries-to-take-you-down-the-tail/
The problem with the verticle approach is that it will be relatively easie to game sites with a smaller target audience, and so results could be effected. What I argued for to replace it was a sophisticated personalised recommendation engine. I explain fully in the post why that would be better.
Posted at 5:32PM on Jan 5th 2007 by Huw Leslie