I was floored to see that DIGG, a key darling of Silicon Valley and arguably one of the key forces that has shaped online social media, is losing a lot of money on abysmal revenues.
These numbers are from Silicon Alley Insider quoting a BusinessWeek article:
- 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
All this when DIGG sees about 23 million unique visits per month according to QuantCast and some 30 million according to DIGG. Silicon Alley reports that DIGG’s expenses are some 14 million annually and wonders where all that goes. Me too because unlike, say, YouTube I do not think DIGG’s hosting infrastructure would have to be all that massive, and with content from users one has to wonder where the big money goes at DIGG.
More interesting however is that modest revenue number. $4.8 million in revenue on some 250-360 million visits. If we assume only 2.0 page views per visit and 250 million visits over the year DIGG is making about 5 million total on 500 million page views, or just about a penny per page view or $10 CPM.
This is probably overly generous (DIGG says they have 30 million uniques and they probably have more than 2 pageviews per unique). However if true that’s actually a fantastic CPM given that the DIGG audience trends very young and presumably is not the key demographic for most advertisers. Although many prestigious and highly targeted websites tend to charge $30 CPM and up I’m confident that number will decline as advertisers realize how unlikely they are to have positive ROI at that CPM. DIGG appears to be doing better than other youth focused gaming sites where advertising can often run below $1 CPM, in some cases even challenging sites to even break even on server and bandwidth costs.