I wonder how accurate that page view count is. Seems extremely low given the number of visitors they have. Just 150 million page views cannot generate that much ad revenue. Maybe $100k-$200k/mo max even with a sweet heart deal from MS?
Seems kind of sad that they're digging (sigh) such a big hole. If they had kept things light originally they could have sold for $80 million and walked away with more themselves with much less risk of total failure.
Hiring a bunch of people, fancy office, tons of servers. Totally unnecessary. The site could be run with very few resources if they had made that a goal.
In world where the only potential money you could make from a startup is the company's actual income, a lot of things would be different.
They would have 2 routes. Your route: be a $200k p/m. The other is trying to find some other way of profiting from being popular. One that pays better then adsense.
Google does. People look at Google & say: Online advertising is a goldmine, anyone with eyeballs to sell is gonna make a mint. But Google is doing something different.
Eyeballs are worth money. Sure. But the going price for raw eyeballs (eg adsense) is pretty low. Google don't sell eyeballs (on search). Not in that way. They sell a processed eyeballs (eyeball soup?).
You could look at it like manufacturing. There's raw input (oar, coal, etc) that's sitting under someone's field. That go through a value chain from mining to processing to assembling to retail. The market decides where 'value' is created & compensates accourdingly. Sometimes, it's counter intuitive. For example, many manufactured goods that only have a small part (maybe 10%) of their value created in a factory. Retail usually gets a bigger chunk then you'd expect (often %50+). Here's an ipod.
A lot of value can be created between eyeballs & eyeball soup. Based on the success of many businesses that have adwords at the base of their processes, there's plenty more downstream.
They're not setting up as a dot-com, more like a news website. Yes it could be slimmer and run on rice and beans but to do so now would be seen as backing down and probably hurt their image in the eyes of potential investors.
I am surprised they haven't opened the door to premium members to allow the use of off site scripts etc. It would be additional revenue and a way to hook the power users further. If the fees were reasonable and included additional functionality then I can very easily see people using it and paying for it.
I don't think they're hopeless. The ideal for them is to be bought out. Google wasn't a good match I don't think. I think the best bet is an established news source, NYT, Chicago tribune, Murdoch, or somebody. They're not set to be a self sustaining business, the goal is to get juicy enough to be bought and paid for.
Kevin is more interested in Revision3 I think, so he's selling his shares to step back from it. Or maybe he's going to begin to give Pownce some much needs love and affection, who knows.
Digg has been around for a while and it seems a little odd that they would still need such a cash injection if they were to be self-sustaining at any point in the future. Are they hiring a lot of new people and moving into new areas?
If they're using this money to cover operating costs for another finite period of time, it points to a failure of their business model since they aren't able to sustain their costs based on their revenue.
Digg has a wide reach, but they don't have great engagement of their users. Going off compete.com's data: Digg users hit 4-5 pages per visit and visit the site less than three times per month. So, their monthly uniques are high at 20-25M, but their total visits are low at 70M.
Digg is a decently impressive service, but community is hard. Google deals with hard issues, but nothing is harder to figure out than people.
..but what’s troubling is that a mere 1 percent of its users (who can be labeled addicts) are generating 32 percent of the visits
I wonder why that is worrying? Advertisers generally want to concentrate their efforts & reach the same person multiple times rather then more people fewer times.
I think it's more a matter of the crowds attracted to Digg. The 360 is the "mainstream gamer" console, whereas Wii appeals to a wider audience and PS3 has a more limited fanbase. The sorts of people on Digg fall close to the 360 base.
The plans seem reasonable, but I hope they're profitable by now. I'm assuming this was a case of cash flow from operations not being able to finance their aggressive expansion plans.
It's possible that they set up some kind of revenue share w/ partner sites. Perhaps they get a share of the revenue from big players who feature a "Digg this" button. At the same time, the less traditional Digg users who come from sites like the WSJ or NYT are going to be more monetizable (for Digg) since they aren't going to be the standard issue Digg user/commenter who uses Adblock.
My guess (and I'm a shareholder) -- down round, more opportunities for Kevin and Jay to extract value (personal service contracts, deals tied to the two spinoff companies, etc). Every employee and ex-employee loses.
The two of them have done a great job, at every turn, of hiding financial information from the minority shareholders. Meaning me most of all. The fact that it's a guess proves my point. I'm still fighting for 2006 financials.
My comment got picked up by valleywag. Just to make it clear, I have the exact same class of shares as Kevin, and no mention of cashing out has been mentioned to me. If there hasn't been "cashing out" I'm fine with that. If there has been, I at the very least should know the details. My issue isn't dilution but liquidity preferences.
You should make clear why you think that's true, since it isn't in just about every situation I've ever been involved with.
You aren't on the board and you aren't a major shareholder.
Your shareholder agreement or employee agreement probably state that you agree to vote with the majority in all votes which is another way of saying you don't get to vote (or gain access to the financials).
Seems kind of sad that they're digging (sigh) such a big hole. If they had kept things light originally they could have sold for $80 million and walked away with more themselves with much less risk of total failure.
Hiring a bunch of people, fancy office, tons of servers. Totally unnecessary. The site could be run with very few resources if they had made that a goal.