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Digg’s Lack of Ad Targeting is Hurting Revenue

By Trisha Lyn Fawver

Will they or won’t they sell social news site Digg?  It’s been on the rumor mill for years, whether it’ll sell to Yahoo or Google, no one can tell.  But I can tell you one thing – you can’t sell a sinking ship, and with Digg’s Miserable Business as reported at Silicon Alley Insider – they might need to launch a life boat or two.

I’d hope a site with the advantage of having over 20 million unique visitors each month would be apt enough to monetize the site wisely, but it seems with their recent losses in the millions of dollars, they’re certainly not making themselves attractive for any acquisition offers.  Here are the numbers BusinessWeek got a hold of:

  • Last year the company lost $2.8 million on $4.8 million of revenue
  • In the first three quarters of 2008, Digg lost $4 million on $6.4 million of revenue.
  • Digg wanted to sell for $300 million last year, but took funding this fall to set its valuation at $167 million

There’s a glaring problem with the site that can be fixed in no time that even Silicon Alley Insider points out – their failure to target their display advertisements, which I have to imagine is the vast majority of any income brought in by Digg.

A quick glance around different categories of the site makes it painfully obvious that they don’t display relevant ads to the visitors on very clearly categorized areas of the site.  I clicked on Sports and a tragically MySpace-esq CPA ad asking me to correctly identify a photo of a young Angelina Jolie displayed, where a sports merchandise ad could easily have jumped at me and caught my interest as a person interested in the Sports category.  Later, I went to Food & Drink and instead of an ad for a gourmet delivery service or restaurant finder, another CPA ad–this time asking me to correctly identify a photo of a young President-Elect Obama, flashed in my face.

It’s clear with almost all the deals made by Digg in the last year that they’re interested in selling the site while the selling is good.  But being able to deliver good social content to users doesn’t keep the lights on, so they need to hire a marketing firm that knows what they’re doing or get some good savvy Internet marketers in there to shape up their advertising and remember that the site is a business and needs to be run accordingly.

Trisha Lyn Fawver manages affiliate programs, blogs, and explores the world of social media, all at TrishaLyn.com.

  • http://www.webdesignbeach.com/ Web Design Beach

    It is really surprising how such a big company has such a weak adverting system. Almost unbelievably. I guess they could earn more with targeted ads from Adsense.

  • http://thelostjacket.com Stuart Foster

    Digg’s current strategy for business development is completely backwards instead of bringing in the best people on the site for meetings and calling them to talk strategy…they ban them. It seems to me that the IT side has way to much sway over at Digg, and thus their business is going to suffer severely. Digg could be an amazing site, bring in ad revenue, provide partnership opportunities for companies, and a variety of other marketing solutions…but they remain steadfast in their commitment to mediocrity. Ridiculous…

    Stuart Foster’s last blog post..How World of Warcraft Translates Into Social Media Prowess

  • http://www.bookandnovel.com Andrew

    could have been.. 300 mil.. Man. They really screwed that one up, huh?

    Andrew’s last blog post..The Girl Who Loved Tom Gordon

  • http://themakemoneyfromhomeblog.com Kenney and Kim

    Interesting find… untargeted ads. This is obviously super important and easy to fix. Hopefully they are monitoring alerts so they’ll get this post and stop loss ; ) I don’t know how that will go selling to Google though considering they were going to get sued for becoming a monopoly earlier this year when trying to work a deal with Yahoo. I mean they are really being watched. So much exciting drama online, can’t wait to see what happens…lol

  • http://www.free-istuff.co.uk Milo

    they definately will sell Digg, and I can guarantee it will be to Google.
    Who have Google bourght out recently? YouTube, MySpace, FaceBook? Who else is going to be next?
    Hopefully they’ll buy out Twitter, cos it sucks

  • http://www.ushomebusiness.com/ Gary

    Why does it cost 6.8 million to run digg?
    They should be able to run the whole thing for less then a mil!

    bandwidth can’t cost them that much.

    should be able to run the whole thing with just 10 guys not much to digg all the content comes from users. how much does the CEO get?

    For sports they should be trying Satellite TV ads and maybe sports illustrated ads they should also track user and show them different ads one of the big mistake yahoo and MSN make showing the same ads over and over gets annoying

    Gary’s last blog post..product review website

  • http://getinternetmarketingstrategies.com/ JR @ Internet Marketing

    This is certainly gross mismanagement on their part, unbelievable to see such losses with such high traffic

    JR @ Internet Marketing’s last blog post..Some A-Hole Stole My Content – How to Fight and Prevent Copyright Infringement

  • http://www.payg-iphone.com iPhone

    it’s probably 300 mill because they waste money on stupid things.
    have you seen all the little nifty features they have installed recently? Unnecessary, and silly to waste money on such little things, especially during a credit crunch time like ours

  • http://www.rumblepup.com rumblepup

    Wow, with the supposed brain trust behind digg, you’d think this would be, sorry the pun, a “no brainer.” But as already stated, mismanagement will always bring down even the biggest of ventures.

    rumblepup’s last blog post..Inspired

  • http://www.karlonia.cpm/ Karlonia

    I definitely agree with the sentiments of Gary above – why is it costing so much to run Digg, especially considering the fact that their model is set up for site growth from user-generated content? They don’t need to do much original writing or outsourcing of articles. Apparently most of Digg’s expenses are related to payroll – too many people as administrative staff, perhaps with some them being paid more than is necessary.

    From looking at the BusinessWeek numbers, it seems like Digg could become profitable fairly quickly just by cutting costs even without factoring in the revenue side of the equation. And of course, as almost every site that has been reporting on this story has noted, if the obvious problem with untargeted ads is fixed, those revenues could rise sharply.

    Combined with implementing some simple cost-cutting measures, Digg could probably increase the real market value of its site several times over if it really wanted to.

  • http://www.indiesurf.com Darren Tan

    They should have sold Digg last year.. But again, if they stay long enough and hire some marketing experts to build their business, they should be alright. And remember, not everyone on this planet has a Digg account and not every single person has access to the Internet. Once the real globalization happens and sweeps across the globe, i bet every single person on earth will know Digg. Even 90% of my friends don’t know what Digg is..

    If they are as popular as Facebook and Myspace or even Youtube, i think they shouldn’t be facing this problem right now.

    Every business has its ups and downs, it all depends on their choice of solution and determination.

    We’ll cheer you on Kevin Rose! :-)

    Darren Tan’s last blog post..Music Review: ?Emergency? by The Pigeon Detectives

  • http://www.seosultan.co.cc Free Backlinks

    Interesting, but I think they’re desperately looking to increase the time spent on the site in a bid to inflate the price – more time spent means more captive audience = worth much more. They’re concentrating on making it from a social news platform into a platform that recommends interesting stories based on your digging pattern – problem is that people will continue to drink the koolaid and digg what friends send in attempts to exchange diggs – so the whole thing won’t play out well.

  • http://eneep.com Jose C

    This is crazy,There is no reason Digg should be losing money. I can only see two problem’s why they are losing money. One they should have got out while the getting was good. With all these big website’s be sold and estimated at billions, the people at Digg probably thought they would hold out for more money. The second reason is misspending. In an attempt to try and make the site more valuable, they ended up misspending money. This of course is just my opinion, but I wouldn’t be surprised if I was right. They need to fired what ever firm is managing their monies, and handling their advertising. This is a case of the people at Digg trying to hold out for more money, and wasting money on failures in an attempt to raise the value. It kind of makes you wonder if the people at Yahoo made a mistake by turning down the 44+ billion from Google. Websites are not like a fine wine that gets better with age…Until people lose the capability to come up with great idea’s, Their is always going to be new and fresh Idea’s that will eventually surpass yours. Digg is still a valuable site, but when in the pursuit of more money, mistakes can happen.The people at Digg should have took the 300 mil and let someone with more money and resources take over. People now a days think that you have to hold out for a ridiculous amount of money, But the truth is, Digg could have sold the site for 300 mil and came out with another 300 million dollar idea. keep up the bad work :)

  • http://www.gadgets4nowt.co.uk PS3

    What sort of money are we talking about if Digg put the site up for sale?

  • http://www.free-xbox-360.co.uk Xbox 360

    @ PS3, Billions surely.
    It’s a potential goldmine, imagine all the sapce that could be sold as advertising?

  • http://www.saadkamal.com Saad Kamal

    @Xbox360 – Billion? Nah.. I don’t think so. I think the most ever in the valuation was 300 or 600 Mil. Can’t remember the exact figure.

    Saad Kamal’s last blog post..Google PageRank Update Q4 2008

  • http://www.jordankasteler.com/utah-seo-pro-blog/ Utah SEO Pro

    Digg’s lack of valuing users is hurting pageviews and thus revenue.

    Utah SEO Pro’s last blog post..An Interview with Utah SEO Pro (Jordan Kasteler) by Martin Bowling

  • http://www.weightlossweapons.com/blog Weight Loss Blog

    How the hell do you bring in almost $5 million and still end up losing almost $3 million. Where are the costs for Digg? Servers and bandwidth? How much are they paying their employees?

    20 million uniques a month and you can’t turn a profit. That’s ridiculous.

    Steve

    Weight Loss Blog’s last blog post..Stop Counting Calories

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  • http://www.rnbhaven.com R&B Love Songs

    For Digg’s size, their ads have been terrible. They need private ads fast. They should have better ad deals lining up for them.

    BUT, youtube was sold and they were losing money fast so it’s not out for digg.

  • http://www.fairytalebaby.com jason kuiper

    Wow, not a time to be mismanaging a company. That will sink someone real quick!

  • http://8disk.net Silvia

    THat is what they are going to do.

  • http://thewutzup.com thewutzupphilippines

    i think digg is a good buy however things are not doing well with their ad campaign

    thewutzupphilippines’s last blog post..No marriage plans yet for Rachelle Ann Go, Gab Valenciano

  • http://www.seoresults.co.za/pages/seo-tools/ Jacques Seoman

    Hmmmm, it does seem like there is room for some proper management and decision making at digg. The problem of non-targeted ads shouldn’t be too difficult to overcome, it would make sense to get it working properly before trying to sell it.

  • http://www.paystolivegreen.com Patrick

    This would be the best time for somebody like Google or Yahoo to give them a offer for a little more than they are worth and revamp their ad campaign and make tons of money off of the site.

    Patrick’s last blog post..Proximity Hotel: Greenest Hotel in America

  • http://www.velvetblues.com Shirley

    Wow. Digg is overvalued in my opinion. And I think that this is a good time for a buyer. The smart buyer – Google or Yahoo – would then make obvious improvements to increase revenue.

    Shirley’s last blog post..Perhaps You Shouldn’t Blog!

  • http://www.webdesignshowroom.co.uk Web Design Showroom

    You’d think they would have got this right by now! It’s a lesson to all of us though

  • http://www.goodies4free.net Wii

    I think digg will be sold eventually and it will probably be google that gets their hands on it. It will just be another string to their bow to go with youtube and blogger.

  • http://www.dataflurry.com DF Marketing SEO

    Then need to spend a year building their brand and improving revenue and then sell!