Digg Gets Buried: The Rise and Fall of a Social Network

Digg, the once mighty social network was recently sold to BetaWorks for a measly $500k. This is a huge fall for Digg, which at one point commanded a valuation of over $200 million. So how did a social network rise to such prominence and fall to such depths? Digg's rise and fall is a very interesting story - A story of initial successes, of how the site failed to pay attention to user problems, an eventual user revolt and too much VC meddling in the company.

Origins

Digg was started by Kevin Rose and a few friends in 2004 as an experiment. They wanted to build a site where users could discover interesting content on the internet. Users could submit stories and vote on them, and the theory was that the most popular stories would float to the top and that would keep users coming back to the site. Digg was probably the first popular "crowd sourced" news site, and it was instantly popular. Users kept submitting stories and interesting content, and everyone kept coming back to the site to discover new and popular stuff on the internet.

Through 2006 and 2007, the team kept making improvements to the site that increased traction. They added a social networking layer as well, where users of the site could follow each other and send private messages. They expanded the site to include specialized verticals like News, Technology, Science and more. The site kept growing with the strong viral effect, and by 2008, the site was attracting some 250 million users.

The Digg EffectIn fact, Digg became so popular, that it started affecting the traffic patterns of websites. A blog that featured on the Digg front page would suddenly attract a massive amount of traffic, sometimes enough to overwhelm servers and bring them crashing down. This was popularly known as "The Digg Effect" - A sudden spike in traffic that would temporarily boost the popularity of a website or a blog. For website owners, it was unclear how much of this new traffic would stick on, but they nevertheless were enamored, and kept posting their content on Digg with the hope of getting on to the frontpage and driving an enormous amount of traffic.

Digg was growing from strength to strength. It made an estimated $9 million in revenues in 2008. The interesting thing was that they were not using Google's Adsense for advertising, but Microsoft's advertising product. This was a big win for Microsoft over Google's wildly popular adsense, and Microsoft used Digg extensively in case studies to promote their own advertising solution for publishers.

The Google acquisition that wasn't

With Digg attracting so many users and revenues, and Google feeling left out of the party, there were strong rumours that Google had approached Digg for a buyout. The price was rumored to be in the $200 million-range with heavy negotiations going on. Gossip has it that the deal nearly went through, but at the last minute they backed off. It seemed like Kevin Rose was willing to run the site as an independent entity and eventually take it to IPO. I guess he thought he didn't need Google's support and since his company was doing so well, it only could grow bigger.

First Mistakes

In hindsight, turning down the $200 million offer from Google was a big mistake. Things would soon start going bad for Digg, but there always had been signs.

Digg was widely accused of having "Bury Brigades" - Groups of users that would control the stories that would show up on the frontpage by mass voting for them or preventing certain stories from showing up by burying them. At one point, there were even corruption accusations - That some users were accepting money to promote stories and get them on the front pages. After a point, some top users on Digg openly started charging for submitting stories and getting them to the front page. Some political groups formed informal networks to prevent stories of political opponents from reaching the front page of the site.

Though things were getting ugly under the hood, the management maintained that everything was fine and that these were just growing pains of a popular social network. Until one day, when users revolted and how!

The User Revolt

On May 1st 2007, a group of hackers cracked the Blu-Ray encryption scheme completely, exposing the "master key" that could be used to pirate all past and future Blu Ray movies. The "master key" in question, string of hexadecimal characters that read "09 F9 11 02 9D 74 E3 5B D8 41 56 C5 63 56 88 C0" was posted on the Digg site by a user. The Motion Pictures association of US, in a stupid effort to prevent the leaking of this key, send a legal notice to Digg, asking them to remove the offending post. Digg quietly began censoring the site, removing the posts with the key and banning users that posted that key.

As soon as Digg users discovered what was happening, they erupted in a spontaneous revolt, and repeatedly started posting the master key on the site. Things got really out of hand a few hours later, when every single post on the Digg site was a post containing the master key. The lawyers were preparing to sue Digg for posting the secret key, while users were preventing anything but the secret key from appearing on the Digg site.

After a few nerve racking hours, Kevin Rose came out and sided with the users, asking the lawyers to go to hell. This made Kevin Rose very popular with Digg's users, but the company's troubles were just about to get worse.

The Fall of Digg

By 2010, Digg was slowing slipping in popularity and rankings, and the VCs that had invested in Digg started to get desperate. They started getting very aggressive, and speculation has it that they interfered heavily in an upcoming re-design of the site called Digg v4. Several popular features were removed from Digg v4, and the ranking algorithms were heavily tweaked in favour of getting more advertising revenue at the cost of quality content. To make matters worse, when the redesign launched on Aug 25, 2010 the new site was very unstable, and many users were horrified to find their favorite site was being taken away from them by vested interests. Another protest movement started, with many users declaring Aug 30th as "Quit Digg" day. Rival sites like Reddit seized this opportunity and welcomed fleeing Digg users.

Digg's traffic dropped drastically after Digg v4, and never recovered. Once a site alienates users, it is nearly impossible to attract them back, and Digg discovered this the hard way, steadily loosing users (and advertising dollars), until in July 2012 they had to dismantle the company in a fire sale.

A somber lesson

The fall of Digg is a very good lesson for entrepreneurs on what not do to. Digg was excessively focused on revenues and to what VCs were saying, that they put users second to them. Maintaining a loyal community of users is hard, and once you have a community, you have to continue to take care of them. The fatal mistake, of re-designing your site to please VCs and alienate users was the last nail in the coffin on Digg, that eventually led the company's fire-sale. That's the thing about user loyalty - If you want your users to be loyal to your site, you have to be loyal back to them.