Digg

Documented cause

Digg was founded in 2004 by Kevin Rose, Jay Adelson, Owen Byrne, and Ron Gorodetzky in San Francisco. The concept was social news curation: users submitted links to news articles, videos, and websites, and the community "dugg" (upvoted) or buried (downvoted) content. The most-dugg stories rose to the homepage, creating a democratic editorial layer on top of the internet. The model was simple, viral, and genuinely powerful: Digg generated enormous amounts of traffic for linked sites and had a passionate community of "power diggers" who competed to get stories to the homepage. The company raised approximately $45M from investors including Greylock Partners, Omidyar Network, Sequoia Capital, and RRE Ventures, and was the dominant social news site through 2005-2008. In 2008, Google approached Digg with an acquisition offer of approximately $200M. Kevin Rose declined, believing Digg could achieve a much higher valuation independently. In the same period, Reddit (founded 2005, acquired by Condé Nast 2006 for a reportedly small amount) was growing steadily. Digg had the advantage of traffic, brand, and cultural cachet. The fatal moment came in August 2010 with the launch of Digg v4 — a complete redesign that was intended to modernize the platform and compete with the emerging Facebook feed. The v4 redesign removed the power-digger community features, integrated with Facebook and Twitter in ways that deprioritized the organic community dynamic, and changed the algorithm to promote mainstream media content over the user-submitted and curated links that had made Digg distinctive. The community's reaction was immediate and catastrophic: within days of v4's launch, Reddit's traffic spiked dramatically as Digg's most dedicated users organized a mass migration. Digg.com traffic collapsed. By 2011, Digg was a shadow of its former self. In July 2012, Betaworks acquired Digg's brand and intellectual property for approximately $500,000 — roughly 0.25% of the $200M Google offer that Kevin Rose had rejected four years earlier.

Lesson

Failure anatomy