Digg To Lay Off 37% Of Staff, Product Refocus Imminent
techcrunch.com
techcrunch.com
From this, I inferred that Digg wanted to be an idea lab, a kind of innovation factory, sort of like Google, constantly coming up with new ideas and services. So they staffed up in the hopes of becoming that kind of company. But they failed to pull it off.
"That's a good idea. And Digg, too, huh?"
"Don't even bother with Digg," he said, "There's no chance your article will get on the front page".
"Well, it's worth a shot," I replied. He seemed to disagree.
So, being the stubborn guy I am, I decided to post on both. Every time I post on reddit, I get at least 100 views from it. I've yet to notice a single view from posting on Digg.
I don't really know what my point is. I guess this anecdote is another reason they're in trouble. If I have an interesting post (subjective), posting it on Digg will now be an afterthought to me.
It's necessary, at least. The problem with having multiple layoffs is that morale suffers across the board ("am I next?", etc), and the best talent often flees.
http://www.imdb.com/title/tt0256408/
It's called Startup.com and shows the massive initial growth of Govworks web-site (300+ staff), but then things go South and their competitors catch them up and put them out of business. One of my favourite documentaries and gives good insight into the dot com bubble burst of 2000-2001.
At some point you have to wean yourself off the VC money. Some of these companies were set up more to land investors than customers, and even though they understood, intellectually, in the long term the money had to come from the customer, it's not an easy shift.
Not really. What it could mean is a downward spiral, which is what's been happening in the newspaper biz. Fewer people can't do as much work, which means lower revenues, which means fewer people, which ...
The deeper problem (in the newspaper example) is very few of the employees have skills that can be leveraged to increase output while reducing headcount. Newspapers are loaded with coal-shovelers. Fewer shovelers, less coal. If you've built your business on coal-shoveling and the value of coal drops, it's very hard to find a profitable kernel to retreat to.
In most cases that's true.
However, it's also a possible and very feasible way to cut away the excesses and keep on-board core pieces that can compensate for the losses. For example, a company I used to work for had a massive layoff when the bubble burst in the early 2000s. They learned their lesson and had very gradual employee growth while they still continued on lucrative projects eventually expanding rapidly today.
And so those users of other demographics simply went elsewhere to build their communities. The latest Digg was an attempt to push back against the niche that ruled Digg, but then that niche just found another community as well.
Real life democracies, in government, exist as a compromise simply because there isn't always the ability to pick up and move to a new nation state if you aren't happy with the local rules. On the web it's all too easy to move somewhere else, so typically all web communities are niches that push away newcomers who are different. On the web democracy does not give rise to real, long-tail diversity; it's just a quality filter.
It's not a general indictment of democracy, but it does prove that there can never be such a thing as a general-interest social news site. The future is nichey.
I agree with your entire comment. I'd just add the word "currently" before the sentence indicated.
Just because it's that way now does not mean it always has to be that way. The web is either going to figure out the problem of dynamically changing due to minority opinion or we're going to have a tremendously huge social problem on our hands in a few decades.
I really don't understand what you're getting at there. Can you clarify?
The problem is very simple: the crowd is often wrong, uniformed, mistaken, prejudiced, emotionally irrational, or misled.
Democracies work by giving voice to the minority. The black preacher standing on the corner in 1960 telling the majority whites that Jim Crow laws had to go? He was protected. He was able to work with the majority to promote his opinion and change things.
But nobody liked him. At least at first. At least not in the majority. He was considered in the same category as those calling for the immediate liberation of farm animals -- somebody with a strange and odd opinion that would never work in modern society. Perhaps he was a bit of a nut.
Minority opinions are frequently wrong, no doubt. And there are lots of weird and crazy people out there. But for a social system to function, people of strange and perhaps offensive opinions must be able to persuade others of their cause. It's the entire basis for change.
If this is not replicated on the web, what will happen -- what already is happening -- is that the software will manage to split people into tinier and tinier groups of total conformity. The naive might think this is a good thing: no more trolls to ruin the conversation/group. But actually it's the worst thing imaginable: no more minority/strange opinions persuading others that change is needed.
In civic life I can stand on the street corner and talk to passerbys. On the web, if I'm shut out, I'm shut out. There is no voice (or rather, everyone can speak as freely as they like, they are just never heard. Same difference)
This change-by-minority-persuasion is a critical part of healthy systems. Without it? I'm not a fortune-teller, but it's not going to be pretty.
The internet is changing politics in many ways, not all of them good, but I really don't think that getting less exposure to crazy opinions is one of them.
And I'll grant you that we -- this community -- are the leaders in integrating technology into our lives. Most other folks are not as hooked up as we are (although that is quickly changing)
But my point was about social systems, not just political ones. Sure, I used the example of Jim Crow laws and politics because it was so easy to understand, but the same argument can be made for any social system, from 3 people to 3 million. I'm not trying to make a political point. I'm trying to make a point about sociology.
Take politics out. Change the subject to distributed systems versus hub-and-spoke systems. Same difference. Or the use of SQL-less databases. Or the best patterns for testing. Politics is just used as an example. It's really not the thrust of my comment.
Politics is a nice metaphor for describing how groups of people operate. Everybody can agree that Jim Crow laws were bad. We're still fighting some of these other issues, and I didn't think it was useful to bring them up.
It is amazing to me that Digg could have fallen this far.
As weird as it might sound, my ideal Digg situation is that Kevin buys back shares from VCs (everyone knows Digg's over-funded) to get some sort of monetary incentive to perform.
Digg's potential is so great. It's just sad to see it go down like this.
First, it’s struggling with delivering unique value to its customers. When Digg launched in December 2004, it faced limited direct competition in the market of social media aggregation. Since its launch, Digg now competes with a myriad of services, such as Reddit (launched in 2005), Techmeme (2005), Huffington Post (2005), Newsvine (2006), and Hacker News (2007), just to name a few. There are now a huge variety of media aggregation websites targeting general and niche audiences. In addition to increased direct competition, Digg is now also facing a substitution threat posed by companies such as Facebook (2004), Twitter (2006), and Google Buzz (2010). An increasing number of consumers are turning to these services for their daily fill of news.
Second, Digg is struggling with an untenable cost structure. With about 72 employees before its reduction in staff, Digg has about 9x the number of employees of Reddit, a key competitor. Consider another competitor, the Huffingpost. It attracts about twice the number of visitors per month, employing a full-time staff of just 60. Commentators have also noted that Digg had unusually high infrastructure costs, although I suspect they have remedied some of these issues since these reports. With revenue of just $15 million, and a unsustainable cost structure, Digg is currently operating at a loss.
For Digg to survive and prosper into the future, it must refocus and develop a service that delivers unique value relative to the many competing services that are currently available. Given the range of competition, it’s not clear what Digg can change to deliver unique value. Next, Digg must continue to reduce its cost structure by reducing its human resource and infrastructure costs. Needless to say, increasing value for customers while reducing costs is a difficult challenge.
As an anecdote, I was using Digg substantially up until the 2008 elections. I haven't used the service since then. Instead, I'm spending time on Hacker News (+ Techmeme, Twitter, Facebook).
HN is a niche social website and I don't think that it eats from Digg or any other social website.
Maybe my perception of the costs associated with running a high traffic such as this are way off, but doesn't it seem like $15m in revenues should be able to sustain the company... at least to the point where it doesn't operate at a loss?
Also how common is it to offer to find jobs for people being layed off?
Very.
The uncommon thing is that statement being any more than a useless platitude.
I do question whether platitude is the correct word, but "useless platitude" is only a pleonasm if "useful platitude" is a contradiction, which I don't believe to be the case.
If it's good enough for Shakespeare, by God it's good enough for me!
Edit: This is on the basis that the layoffs will likely not be management.
Management/founders are in the business of making bets. Sometimes these bets don't pay off-- that doesn't mean it's an "utter" failure in decision making... And these employees aren't "suffering". There are two possible outcomes when you go to work for a heavily funded company and this is one of them.
I agree with you about Digg's not-so-bright future.
Ahead of revenue, sure, but they were increasing revenue, traffic, and moving towards profitability. Spending like mad and going nowhere is a different thing entirely.
Like if you have a round of layoffs, but you have employees with faith in the management and the product, you're going to have remaining employees that stick around and work hard. Generally people that don't fall in that mold are going to get laid off in a situation like this.
If you have employees that are sitting there with an expectation that the cpmpany will fail, however skilled they might be, they're going to start looking at other options.
I think what I'm saying is: the initial tipping point in a case like this isn't the layoff, it's the ensuing fallout. One strategy that I've seen fail is using fear to keep people working. A "you're lucky you're still here" attitude has had people (like myself) out the door on the first other offer they find. An attitude of "this sucks, but we have to do it to stay around, no one is to blame" (which Digg seems to be going with) prevents things from going further south. Something like that can even unite the remaining group in difficult times.
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you'd be amazed at how people start adding up. We have something around 40 people at TechCrunch, 20 full time.
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and the replies to that comment, such as:
"How may of them were hired to boost your ego?"
"Yes, in the absence of efficient cost control and good management, expenses always rise to meet income."
That's much harder than it seems though, attracting visitors to your site is one thing, getting them to come back after they've soured on you is a completely different one.
Digg always had a very large number of employees for a site in that segment, but just throwing people out is not going to make things better in the short term (likely worse). At least they'll stop burning money while they figure out what the next steps are.
It'll be interesting to see how they plug and reverse the leak in traffic.
1. Throw stuff off the boat (including passengers);
2. Bail water off the boat; and
3. Fix the hole in the boat.
Kevin Rose tried (2). The new CEO is trying (1). Both of these delay the I editable.
The hole in the boat in his case is the $40m in funding Digg has received. I'm not sure there's any recovering for that.
The crux of Digg's problems is that it went the way of most online communities: it became extreme, exclusive and inbred. That's hard to recover from.
Ultimately Digg is now largely irrelevant. Twitter and facebook have supplanted it as the sites for discovery for most people.
"It’s been an incredibly tough decision. I wish it weren’t necessary. However, I know it’s the right choice for Digg’s future success as a business. I’m personally committed to help find new opportunities for everyone affected by the transition. Digg’s Board members have also offered to help find placements within their portfolio companies."