DIGG Losing Money Despite Huge Traffic

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.

Related:  November 2006  – Owen Byrne of DIGG

9 thoughts on “DIGG Losing Money Despite Huge Traffic

  1. I’d guess that the coming advertising winter is going to *punish* sites that are old but do not turn a profit. DIGG is still considered golden by many so maybe they’ll escape, but I don’t see VC money flowing to prop up bad business models, and if it does … shame on the VCs

  2. Hold on a second, what happens when you compare digg.com to other popular sites like twitter, myspace, youtube, facebook, aren’t all the sites losing a bit of money because of the state of the economy? Either way I think digg.com will survive due to its number of unique hits. All they need is a proper marketing strategy. Good luck digg!

  3. Recollections: DiggIt was some site that allowed someone browing the web and encountering an item of interest to him to indicate the existence of his interest in the item. The large numbers of users were expected to act as an intelligent crowd whose Diggs would reveal nuggets of value. After opening, the site seemed to be troubled by DigIt cliques which had their own agenda. Revenue is apparently derived through google ads that reward clicks.

  4. Johnny it seems to me DIGG has had a long time to develop strategy which is why I was so surprised they were losing money even during a very bullish online ad market. Myspace is very profitable and Twitter and Facebook are arguably too new to really value yet though IMHO all these “high traffic / low revenue” websites are still valued in bubble mode.

    FoolsGold: Yes that was the idea and I think it still works pretty well as they cracked down on the abuses, but the Digg Demographic is probably not all that desirable to most advertisers as it is weighted to young heavy net users who don’t have all that much disposable income.

  5. Digg Demographic emphasizes heavy net users who are too young to have high disposable income…
    Okay. Some options:
    Change the Digg Demographic.
    Convince advertizers young heavy net users DO have high disposable income.
    Convince advertizers that young heavy net users may not have high disposable income but they still have enough of it and do spend it freely and are therefore a good market.
    Form one of those dreaded DiggItCliques and use it as a captive tool for enhancing the value of Digg’s first page.

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