MappingTheWeb //

The rumour mill is swirling with talk of a Digg acquisition by News Corp. Both GigaOM and TechCrunch report that the media conglomerate is offering a reported $150 million for the ‘democratic’ news site. At this point, they are only rumours, but my guess is that talks are well on their way and an announcement may be made at any time.

Is this a good opportunity for News Corp? Meh. I’m not so convinced. Although I am a huge fan of Digg and I visit on a regular basis, I see a better fit elsewhere. In my mind, the obvious bet may be Google. I definitely see a better fit there - especially with Google’s mission of organizing the world’s information and making it universally accessible and useful. In addition, Digg’s algorithm functions in a similar way to Google’s Page Rank algorithm so there may be some advantages to that.

From my perspective, I think $150 million is a low ball offer. I remember seeing that Business 2.0 magazine with Kevin Rose on the front and they valued Digg at $200 million. At the time, it seemed like a rather ridiculous valuation, but time has passed since then and I think that number is a lot more realistic now. Digg’s traffic has risen considerably - not to mention its userbase. And because Digg benefits from the network effect, it becomes more valuable as more people sign up.

In addition, there is stunning financial proposition. Because Digg generates millions of page views with relatively low bandwidth (as opposed to YouTube or Flickr), the margin between cost and revenue is greatly increased. Digg pages consist almost entirely of text which loads quickly and costs very little to run.

My opinion is that Digg should hold off and wait for a higher bid from a company with a better fit.