BW's article on Digg, one response

Stephen Baker

Last week's BW cover story on Digg provoked lots of angry responses in the blogs. Since I'm on book leave, I'm a bit of an outsider. But I went onto Paid Content and asked Rafat Ali to detail his criticisms. He did. I'll leave the response to my colleagues who produced the article. But there is one area where I can weigh in.

Valuations. Loads of complaints focus on the cover language: "How This Kid made $60 Million In 18 Months." After seeing the headline Scott Rosenberg writes: "Gee, I thought, bleary-eyed, I guess I missed the story about how they sold the company. Good for them." His idea, shared by many, is that money is not "made" until an asset is sold in one marketplace or another. But if you look at the rankings of everything from executive compensation to individual wealth, they're based on valuations of diverse assets. Many are open to question and just as tenuous as the valuation of this New Jersey bubble-inflated split-level I'm typing in at this very moment.

So by the logic of the wealth rankings, it's fair to say that Kevin Rose has "made" money, even if the value of Digg takes a dive before he converts it into other (fluctuating) investments, be they publicly traded Digg shares, dollars, or equity in Yahoo!

The other big question is whether $60 million is the right number. As I mentioned on Friday, I find the [description of] sourcing on the valuation thin. ("People in the know" who say the company, of which Rose holds 30% to 40%, could fetch $200 million.) Jason Calicanis, a Digg competitor, runs the numbers and says it makes Google look cheap. I know nothing about Web 2.0 valuations. But I do know that the debates over a company's value are hardly resolved when it is purchased. The arguments rage on. Did Murdoch overpay for MySpace? The market's verdict, whether it's in startups, stocks or real estate, changes from day to day.

UPDATE: Just to be clear, I added "[description of] sourcing." I have no doubt the cited "people in the know" were in fact well-informed sources. But on such a contentious point, readers could have used much more detail on the number and nature of the sources, even if they remained nameless. Also, Heather's out of pocket and I can't approve comments from this laptop. I've e-mailed a BW colleague asking him to, but haven't received a response. Sorry for this. If you want to send a comment, please e-mail me at wfoleyj at gmail, and I'll cut and paste them into comments.

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