Yahoo+Digg Possible?

Today I woke to a Digg post pointing to a CNN article theorizing that Yahoo might purchase Digg in the future…

MONEY.CNN.COM Article
There seems to be a pattern here: Website’s traffic takes off, Yahoo buys website. Yahoo’s rumored acquisition of Digg, a popular news website where readers rate articles, would, if if happens, make it the fourth social-media startup the Internet portal has acquired in less than a year in an effort to compete with Google. Digg co-founder Kevin Rose’s non-denial denial : “We are focused on features, not selling the company.”

What’s this about features? I’m fairly certain that the only new features over at Digg is the lame update for DiggSpy from a few weeks ago. The one thing that really has been driving me, and a few of my co-pliggers, crazy is the lack of features offered by Digg. That’s why we made Pligg! I am predicting right now that Digg will sell to a larger company in the coming months. Most likely the buying company will be Yahoo because they’re trying to purchase half of the net right now. This is probably because Yahoo is swimming in wealth, being the most popular website in America right now. Yahoo should really sit down and think internally rather than buying up all sorts of third-party sites.

I think that Kevin, like most of us, wouldn’t hesitate to make a pretty penny selling Digg to Yahoo at a ridiculous price. After all a few million dollars on the side would be some good start-up cash for a new studio for his video shows that he likes so much. From what I have seen over the years, Kevin is more comfortable and happy in front of a camera than behind a desk. If he were offered the opportunity to make his video productions a full-time job, he would take it. I would do the same if I were in his shoes because I can relate to his video interests.

So what is to become of Digg if this Yahoo takeover occured? I think our chances for new features will actually improve. With the support and funding that Yahoo will have backing Digg the site will most likely grow in a good way. I think that over time Yahoo would want to start to generalize the Digg audience to more than just “techies”, perhaps creating different Digg subdivisions for different groups of interests. What do you think will happen to Digg if such a takeover happened? How much money to you think they could stand to make on the deal? I’ll report more on this later if the story develops into something more substantial.

One thought on “Yahoo+Digg Possible?

  1. Whether Digg sells or not (and I think it will, not sure if it will be to yahoo, but no one else really is in the market for it at present) will not be upto Kevin and the crew. As Digg received a reported $2.8 million in VC from Greylock Partners and Omidyar Networks last year, the people behind that capital will determine when they sell, and for how much.

    Traditionally VC like to receive a seven to ten-fold return on the estimated market value at the time of funding. I have read that Digg may have been valued at about $7 million at that stage. That puts the present market value of Digg at anything upto $75 million. Now the VC people may be willing to accept less as the time frame for their return is quite small, less then a year I think. In this case, they may go for $30 million.

    I am not sure how much Kevin and the guys will get out of this, but I would think he will be able to smile a lot.

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