Digg This: Deal or No Deal?

CEO Jay Adelson discusses rumors that the thriving content-sharing site is up for sale and its plans for 2008

As the year winds down, so often does the Web rumor mill. After all, even the most prolific bloggers have to put in some holiday time with the family. But for Digg, there hasn't been any shortage of gossip this holiday season.

The popular content-sharing site, where users post and discuss links to articles, videos, and images, has been the subject of myriad rumors. Earlier this month, speculation abounded that Digg Chief Executive Jay Adelson and founder Kevin Rose were shopping the site for $300-plus million, with the help of investment bank Allen & Co. Then, on Christmas day, the blog message boards began buzzing about a report that Digg was acquiring Spanish-language counterpart, Menéame, and possibly purchasing content-sharing site coRank.

So what is really on Digg's agenda for 2008? Adelson says no acquisitions are in the works. And, much to the disappointment of those betting 2008 will be the year for Web IPOs, there are no plans to go public. However, Digg executives do have an eye on international expansion. Adelson also says there are plenty of new Digg features planned for early 2008: Next year will involve a "continuation and maybe even more of an exclusive focus on this idea of customization and personalization," says Adelson.

A New Set of Tools

For the past year Digg has concentrated on letting users tailor their experiences. In September, Digg announced new features enabling users to develop fuller user profiles and better locate stories of personal interest (BusinessWeek.com, 9/19/07). Such personalization features have become increasingly important as Digg's audience has expanded beyond technophiles ravenous for the latest gadget review and Web startup news to a more mainstream crowd. Digg now has 25 million monthly visitors, according to Digg's internal records.

In 2008, Digg plans to unveil a "story suggest" feature that recommends articles and other content from Digg's vast user-submission pool based on the kinds of stories an individual user has read, rated, or shared. "We have to throw that out there in order to deal with the mass amount of information on Digg," says Adelson, adding that with such personalization, "your profile page will be much more interesting to you on the first view."

The company also plans to roll out tools that give users more reasons to keep coming back to Digg. An "alert" feature will notify users who have signed up for the alerts when stories are posted by users they want to follow or on a subject of interest to them. Digg will also recognize users who contribute often to the site, potentially by adding a rating system similar to eBay's (EBAY) seller review system. (EBay sellers are distinguished by the number of stars they have and the percentage of positive feedback they have received, among other things.) "This way, we can engage users and show some recognition," says Adelson, adding that the new system will not rank users in comparison to one another as an earlier, abandoned, system did. "It is a much more spread-out way of showing recognition and rewarding people without having the direct comparison."

Adelson says Digg developers are looking for new ways to bring Digg to the leading social networks. Digg, like many Web companies, already has a page on Facebook. Adelson says he is watching to see whether Google's (GOOG) OpenSocial tools, which enable developers to create applications for a variety of social networks, take off, allowing Digg to easily extend its site on other social networks. News Corp.'s (NWS) MySpace has already signed on to the platform (BusinessWeek.com, 11/1/07). "The big question for 2008, at least for me, is the impact of OpenSocial and Facebook opening their platforms up," says Adelson.

Inquiring Minds Want to Know

The big question on many other minds, however, is about acquisitions. Is Digg on the market, or will it soon be in the market to buy other companies? Digg has been quiet about whether it is truly looking for a buyer. Adelson says that, given the technology landscape and the pressures of being a public company, most new Web companies will find acquisition to be a much easier exit strategy than an IPO. He also says that right now, the executives at Digg are busy trying to make the site more popular and profitable, thanks to an advertising deal with Microsoft (MSFT). "We have had a great first few months with Microsoft," says Adelson, adding that the cost per thousand impressions for a Digg ad has been increasing. "You will see better ad targeting and, probably as Microsoft completes their integration of aQuantive, you will see more interesting [advertising] technologies available to Digg."

Whether Digg will make its own acquisitions is another matter. An acquisition would be one way for Digg to expand into foreign markets, particularly those in which English is not the primary language. "I love a lot of these sites," says Adelson. "And I think there is a tremendous opportunity for Digg internationally."

However, he cautions that no such deals are in the works. With more than $11 million in funding, Digg has enough money to run its business. But it doesn't have a large cash pool to "go and make crazy acquisitions" with, says Adelson. "We want to be very careful [about] how we do that."

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