Google Walks Away From Digg Deal | Hacker News Reader

Google Walks Away From Digg Deal

techcrunch.com

44 pointsterpua37 comments

My personal opinion is that given that they have roughly the same traffic levels with 60+ people that they had with 10 people, and are somewhat close to breakeven, is that it's time for layoffs, not another round of financing.

Owen, you built it - don't you have some pull still. You have the right idea, layoff the excess to get cash flow positive.

My 2 cents - quit trying to be something to everyone - because those of us who visited in the early years left long ago.

btw it's Merrick - had lunch with you at Pubcon in '06

Very little pull. Reason #400 why I left - basically because I felt that whenever I suggested a good idea, it was shot down just because I was the source.

Did you get any equity?

Obviously, or I wouldn't be so eager to see them sell, but equity without liquidity is useless. Digg management has already demonstrated their willingness to treat my shares differently from the other founder's shares (see my comment above about Kevin cashing in shares).

Owen: NOOOOOOooooooo!!!

It was so close to getting you that lovely vacation to Tahiti you so richly deserve. Sorry, dude. We're still rooting for ya, though.

As it turns out I have a nice high paying job for a well known travel website and get employee discounts ;-). So while extended vacations are out, Tahiti might not be.

Good luck Owen. I hope one day we will know the real story of how Digg was born and created :).

> We’re hearing they’ll just push through with a new round of financing.

I may be a bit clueless about the whole web-entrepreneurship thing, but I'm amazed that after three and a half year and zillions of users, Digg is still not making money. How would such a thing be worth 200 million dollars, anyway?

"I may be a bit clueless"

more likely there's a VC or two about to invest in digg that is clueless...

With "zillions" of users they will find a way to make money eventually.

It is a pattern used by many others (both online and offline) and it is easier to create leverage once you have a large established userbase (especially if you are able to determine their demographics), though often it may seem a lot like gambling.

Many of the other big social sites have also yet to make money/profit.

>With "zillions" of users they will find a way to make money eventually

Either that or the next thing comes along and they move on. See Slashdot before and after Digg.

An uptick in quality?

(Seriously, what digg did was to pull all the people stupid enough to install Alexa.)

Yeah, maybe there's two periods when a site like Slashdot or Digg is good - before the masses arrive and after they leave.. It's the bell curve upside down :)

monetizing news, is very tricky. i can't thinnk of 1 social news site that makes a lot of money.

Digg has sixty+ employees and was recently described as close to breaking even. So they make money, they just also spend it all.

Also for those who haven't read Sarah Lacy's crappy book on Web 2.0, Kevin has already cashed out some shares.

oh yeah, that must be how Kevin made $60 million in 18 months

http://www.businessweek.com/magazine/content/06_33/b3997002....

I understand and agree with your point but for Google it might not have been wrong. Not that they can make money from it directly but as part of the bigger plan to organize the worlds information.

I think the main reason google walked away from this deal was that $200 million is simply too much money to spend on a acquisition that dosn't have a net positive effect throughout the company and the web. The fact that they walked away at the time they did shows you that there was were red flags that were raised somewhere and a serious reconsideration was in order. Theres also the issue of digg's technology...

i find suspicious that they backed away when doing due diligence.

just recently, techcrunch reported about google trying to introduce digg-like features in its user interface. seems to me that either google wanted to either buy or have a close look at digg's algorithm.

(this is just speculation by the way)

I'd bet Google's Ph.D collection could could come up with an algorithm that performs as well as Digg's (that is, not very) on their own... The UI is of course no problem either.

The whole deal seems pointless. Some would claim it's for the userbase, but Digg/Reddit by now have self-selected themselves down to a notoriously bad userbase. Would you pay $200m for those guys?

Bad user base from what perspective? From the eyes of someone who likes the conversations on Hacker News, sure. From the perspective of a company that makes their business selling ads, probably not so much.

It's interesting speculation, but I think it's just as likely that once Google peered behind the curtain they realized that there is really nothing special or unique about any part of Digg.

"The algorithm" has been reproduced in various formats on many many other sites (including this one). And it's not like Digg's algorithm "works" in the sense of promoting only the best stories, banishing spam, and just generally being intelligent.

Isn't that also true of YouTube, that there's nothing special or unique about any part of it? (apart from the userbase and being known)

True, but YouTube beat Google Video into submission. Google tried everything but still lost out to them.

exactly. my point is that there is something more to it than the parts being special or unique.

In the financial world, we made potential acquirers sign non-disclosure, non-compete, and lockup agreements that usually lasted for a period of 12-24 months.

It's Google has enough negotiating leverage to get out of signing all of that.

Nah, no way. Google believes they're smarter than everyone. They could make a digg-like algorithm trivially.

They only pay big bucks for userbases.

I agree.

However, anyone could make a digg like algorithm trivially. The value to digg is the userbase.

How clever could the algorithm be, anyway?

Another angle: http://valleywag.com/5029423/google-nixing-digg-deal

Man, I really wish Jay Adelson gets his big pay day soon. [And Sean Parker too].

Jay Adelson founded Equinix: http://en.wikipedia.org/wiki/Equinix. It doesn't seem like he'd be hurting for cash.

Equinix went through a 32:1 reverse stock split. The founders pretty much got wiped out of its stock.

http://sec.edgar-online.com/2003/05/15/0001012870-03-002591/...

In his own words:

"Well, to clarify, I still provide consulting to Equinix. As for the money I made from that venture, suffice to say the reverse split nuked my founder's wealth for morbid. There was enough to secure my kids' college education (if they need money from me, who knows), and enough to buy me a new minivan. Anything left is for my parents who deserve every penny. I never said I had a desire to be a VC..."

http://blog.adelson.org/2006/09/im_going_to_try.html

Ah, well that's unfortunate.

My personal opinion is that Arrington just made up this 'acquisition'...

Another angle: http://thenextweb.org/2008/07/26/google-does-not-digg-it-wal...

Reply on news.ycombinator.com