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Why Digg Should Buy StumbleUpon
From left: StumbleUpon Backers Brad O'Neill and Ron Conway with founder Garrett Camp. (Photo: Om Malik.)
Over the past few weeks, speculation has surfaced that StumbleUpon, a social media utility that was acquired by eBay in April 2007 for around $75 million, was back on the market. But as TechCrunch, which first reported the story citing an unnamed source “with knowledge of the sale process,” noted late last week, eBay isn’t willing to lose money on its purchase of the toolbar maker that enables the collaborative discovery and recommendation of web sites.
From what I’ve been able to glean from various sources, it’s safe to assume that StumbleUpon is making between $5 million and $7.5 million in annual revenues, and there maybe some profits involved. A sale at $75 million values StumbleUpon at 10 to 15 times those revenues, not such an outrageous amount in normal times.
But these are not normal times. In this current economic climate, eBay is going to have a tough time finding a buyer, never mind one that would be willing to pay such a price. Barry Diller’s IAC has been floated as a possible acquirer, but that is little more than a highly unlikely suggestion.
While I wanted to hound StumbleUpon founder Garrett Camp for information when I attended his big birthday bash in San Francisco, he (understandably) had other things on his mind. Nevertheless, seeing him got me thinking about how, when it comes to StumbleUpon, eBay could have its cake and eat it, too.
The way to do that is simple — by selling it to Digg in exchange for equity in the combined entity. Before you call me crazy, hear me out.
Despite all the hoopla around social media, only Digg and StumbleUpon have been breakout hits. A combination of the two would create a social media powerhouse that would be hard to beat. With its ability to find and curate some of the most popular online content into various categories, Digg has a presence on the web that few can match. The problem with Digg is that despite its efforts to expand into other verticals (such as politics), it is still too technology-centric. And the most popular stories don’t necessarily mean the best or most relevant content.
Small but Smart
In sharp contrast, StumbleUpon, thanks to its toolbar, has better content from many different verticals. Sure it has a smaller footprint, but experts believe that StumbleUpon visitors have a higher degree of intent when compared to other social media sites, as evidenced by their constant curation of content.
As far as StumbleUpon users are concerned, its toolbar provides more useful and productive results than even Google. That’s one of the main reasons why eBay’s tiny division is able to generate revenues by embedding ads between the various pages it serves up. (StumbleUpon embeds sponsor sites into some of its search results, which provides better returns for advertisers since it lands on a sponsor’s page instead of users having to click on an ad, be it a banner or a link.)
Is 1+1 = 11?
The combination of the two companies would allow them to put together an enviable index of the web, which when married to a smart contextual advertising system could prove to be an effective ad channel.
More importantly, we are living in the age of information excess. To date, search engines have crawled the web, sifted through the data and served up search results. Google, thanks to its black-box formula, has done a good job of this.
Of course, that takes a lot of computing horsepower and (nearly all of) the world’s search scientists. Even that is not enough, because we are creating more information than ever before. Muddying the waters is the emergence of video, and here traditional search doesn’t quite work. Digg and StumbleUpon both recognize this, and have applied large-scale human intervention in order to get a better handle on video content.
Alistair Croll, who writes for us on a regular basis, in a recent email to me pointed out that one of the reasons why Google launched a browser (in addition to a toolbar) is because “…the Achilles heel of search engines is their inability to see an increasingly dynamic, increasingly personal, increasingly secured, increasingly transient web without piggybacking on end users.” A Digg-StumbleUpon combo would have that edge over traditional search engines, making the combined company a likely buyout candidate.
Can the deal be done?
Digg’s current valuation, after a recent recent $28 million round of funding, is rumored to be around $175 million. From that perspective, the deal looks expensive and unlikely; it would make the current Digg investors hesitant when it comes to giving up a big portion of their company. They might want to reconsider their conservatism, however, for the combined entity would be attractive to any company looking to get a piece of the search-advertising market — starting with Microsoft. Barring that, however, it could build a strong ad-based business on its own.
Digg CEO Jay Adelson should pick up the phone and call eBay!
Did Kevin Rose Take Some of Digg’s New Cash?
Digg has raised $28.7 million in a Series C round of funding. The company made the announcement earlier this morning. Highland Capital Partners is leading the current round, which will see Highland partner Richard de Silva join Digg’s board of directors.
The company will use the funds to expand internationally and move into newer offices; it will also hire more people as part of its expansion. Digg had raised $11.3 million in two prior rounds from investors SVB Capital, Greylock and the Omidyar Network, along with a few angels.
The rumor I heard is that Digg founder Kevin Rose got to a sell a nice chunk of his shares in the company, a trend that has become quite fashionable among the Web 2.0 set. Several founders have taken money off the table as their companies wait for a bigger payday. I am sure, however, that he is going to stick around. CEO Jay Adelson declined to comment on the news.
If that was the case, it was a good move for Kevin. Digg, however, is in a bit of a pickle. As this chart from Quantcast makes clear, Digg’s traffic is showing signs of plateauing. There has been a slight uptick in their traffic lately, but what’s troubling is that a mere 1 percent of its users (who can be labeled addicts) are generating 32 percent of the visits, according to Quantcast. They have 224.1 million page views a month, of which 156 million come from the U.S.
This round of financing has been in the works for a while. I was contacted about it by many of my sources, some of whom hinted that the San Francisco-based social news startups was raising a “gigantic” amount of money, but such rumors conflicted with other chatter I was hearing about the company being acquired by larger players. There was talk of Google buying Digg, but last-minute issues might have prevented that deal. Michael Arrington has reported that, “Google was in the due diligence stage of the deal, where they peer deep into Digg’s technology and financial statements,” but walked away due to several reasons.
One way or another, it looks like Adelson, Digg’s current CEO, is in it for the long haul with this company — and so are the investors.
socialmedian Launches First Major Upgrade
socialmedian, which has come under fire as of late for trying to use Twitter as means of raising $500,000 in venture funding, announced Thursday that it has launched its first major upgrade since the company started and its improvements will finally address some of the concerns its users have had since its inception.
First off, the new socialmedian will make it easier for users to get content onto the site and enable bloggers to better promote their content. Dubbed “News-Streaming,” socialmedian’s latest foray into bringing only certain content to its users is quite complex.
News-Streaming lets users filter out all the junk from the social media that they broadcast through the site. According to the company, if users want to share their Twitter feed with the community, but only want their tweets that are actually newsworthy to be collected by socialmedian, they can first input their Twitter feed and next to that, place certain keywords into the field to help the service filter out the tweets that the user doesn’t want posted. In other words, if you want to only post your political tweets to socialmedian, add your Twitter feed to the service and select keywords that may have some relevance to politics. From there, socialmedian will grab all tweets containing those keywords and post it to the site. The same goes for Google Reader feeds, Digg submissions, and Delicious bookmarks, to name a few.
To make sure all that information isn’t annoying other users, socialmedian is adding a filter feature that will let other users “turn the volume up or down” on the amount of tweets and stories making their way across the pages. Those users can choose to see all updates or only those “relevant updates” that they preset.
Part two of socialmedian’s new initiative will make it easier for bloggers to promote their material. In order to do that, socialmedian will launch a “reverse-blog widget,” which after users place their blog feed into their updates, will be featured in the clips section to the right of the socialmedian page and display the latest stories from the blog.
Taking a page out of the Digg handbook, socialmedian is also offering a page displaying the most popular stories of the day, week, and month. Instead of calling newer stories “Upcoming,” like Digg, socialmedian has two new entries called “Rising Fast” and “Hot Discussions.” Genius.
Finally, socialmedian opened up its site to make almost every page available to search engines and users won’t need to register any longer to view different pages on the site.
All in all, socialmedian’s updates seem rather logical and don’t really break the mold in any way. The site was in desperate need of improvement and it looks like it has finally happened. Now we’ll need to wait and see if its users embrace it.
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Thoof Goes Poof!
This past weekend, Michael Arrington reported that Thoof, an Austin, Texas-based social news site, took a dirt nap. It shouldn’t come as a surprise to our readers. Stacey had the scoop way back in January that the company started by Ian Clarke (one of the founders of Revver) was up for sale.
Thoof wanted to create a Digg-like service by observing people’s click streams. The company raised some seed funding from Austin Ventures and others and hit its peak (in terms of traffic) in October 2007 before it began slip-sliding away into oblivion. Thoof’s web site now redirects to Reddit, one of the popular social news sites that’s owned by CondeNast.
Given that the company was up for sale for about six months, I would say it’s just the latest example of the fact that Web 2.0 remains a buyers’ market — not a good sign for tens of dozens of companies that have cropped up across the web. The buyers remain pretty disinterested — even Yahoo is still busy dealing with its own mess. Microsoft is too distracted to do anything, and while Google and AOL are buying stuff, both of them are being highly selective.
Digg, Facebook Connect to Headline at f8Con
Updated: Now that Facebook has announced its redesign, which features a new improved news feed, what will Mark Zuckerberg, the enigmatic and somewhat shy CEO of Facebook, announce when he gets on stage at the f8 conference in San Francisco tomorrow, on July23rd? No, I don’t mean a plain ole a platform upgrade.
That is a question haunting many Silicon Valley insiders, especially since there has been a perceptible cooling of investor interest in Facebook applications that fall into the “pointless” category. What’s not helping matters is that senior Facebook executives are downplaying tomorrow’s announcement, saying this is about developers and that nothing new should be expected. Having covered Silicon Valley for a long time, I know that companies use that as a diversionary tactic. Some have speculated that it might be some sort of a payment system. Update: One of my sources tells me, however, that payments won’t be on their announcement agenda.
My sources tell me that the focus of Mark Zuckerberg’s presentation will be mostly on Facebook Connect, a web ID system. It’s essentially a system that enables application and web developers to allow web surfers to sign in to their Facebook identities. The move would highlight Facebook’s desire to become a critical part of the web infrastructure, and moving away from the just-another-social-network image.
Facebook announced Facebook Connect in May in what seemed to be a response to MySpace & Google’s moves to tout their individual web ID systems. Facebook Connect also allows companies to send status alerts back into the Facebook system where they can be displayed on Facebook’s news feed. The newly redesigned feed seems to be perfectly designed for an onslaught of such personal data. In many ways the new system would be a more palatable version of the draconian and ill-conceived Beacon advertising system.
Facebook Connect in many ways is the exact opposite approach taken by the company last year when it encouraged hundreds of developers to create applications that lived inside its silo. These applications grew at a breakneck speed and created a bubble of their own. They also put the Facebook infrastructure under extreme stress and on a cost curve that only large revenue streams can support. The inane and pointless apps cost the company a lot of bandwidth, not to mention the rising hardware costs.
By asking people to take their “identification” system, the company is hoping that others will build applications on their own infrastructure, allowing Facebook to focus on developing more high-level services and focusing their infrastructure dollars properly.
As part of the Facebook Connect announcement, expect around 20-odd companies that are using the system on their end. One of the highlights of Mark’s showcase would be Digg, which would use Facebook Connect to create a personalized home page that takes into account social news recommendations from friends on Facebook.
Digg, as you might remember, was one of the first companies to sign up for Facebook Connect. The two companies share a common investor, Greylock Ventures. This new closeness might explain why Google might be finally ready to buy the San Francisco-based Digg for $200 million. Why would Google buy instead of building their own Digg? It could help block Facebook Connect, for one.
Apart from Digg, there are a bunch of other companies that are building Facebook into their products, though many of them are actually more on the “useful” end of the application spectrum. Our sources have indicated that Facebook might out-execute their much bigger and richer rivals with Facebook Connect, and tomorrow might be the first chance the rest of the world gets a chance to get a glimpse.
Bonus link: Follow tomorrow’s event on AllFacebook.
Photo courtesy of Facebook
Bbuzz.fr rejoint la communauté Diggons.com
Pligg Beta 9 / 掲載済み
Digg Changes Algorithm: No More Group Voting Up Stories
Digg Has Super Users Or Hates Ron Paul
One tin foil hat post in 24 hours isn’t enough. 
On January 16 (yesterday as I post this) I wrote about about Paypal suspending the account of a Ron Paul supporters group, effectively stopping Paul’s supporters paying for a recount in New Hampshire. The good news (for Paul supporters anyway) is that the authorities granted an extension and a supporter stepped forward and provided the money required in time (the original funds remaining frozen by Paypal).
But here’s the possibly bad thing: either Digg has super users who can single handedly bury stories on Digg, or they’re censoring Ron Paul posts.
I just happened to be reading on Twitter about a service called the “Ajaxonomy Bury Recorder (ABR)” a service launched last year that allows you to see the the number of buries on a Digg story by the time of each bury, the reason and at what stage in the voting process it was buried. Thinking that the Ron Paul story might get a few votes, I decided to run it in ABR through out the afternoon to see what might happen.
At exactly 43 votes the story received one bury for spam, and then it completely disappeared from the upcoming sidebar at Digg in its particular category. I ran a search for TechCrunch posts (newest via URL) on Digg to see whether it was there; nothing, clicked the include buried stories post: bingo, the post appeared in the list.
There have been rumors and suggestions that certain users at Digg have “special powers” in the past, so what I saw could simply be one of those users who can alone bury stories submitted to Digg, at any stage of the voting process. Or (with tin foil hat on) Digg might have decided to ban Ron Paul. There’s zero way of knowing, and Digg never talks about its internal workings so we have no way of finding out which one it is, or even if it’s a combination of both. I wonder how long it will take for someone on Digg to bury this post? Thank god for Reddit, eh 
Update: Pronet noticed that Digg itself buried stories back in May 2007.
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Who Spams Digg the Most
On the heels of the recently launched Techmeme Leaderboard, Patrick Altoft at BlogStorm has cobbled together an unofficial list of sites that have the most Digg juice. The ranking is based on Google’s site search (how many results come back for a search of “site:digg.com arstechnica.com,” for instance, a site which happens to be No. 4 on both lists). The sites with the most links on Digg rank highest.
The No. 1 site is YouTube, followed by Yahoo and Google. No surprises there. Only three blogs make it into the top ten (Ars Technica, Engadget, and Gizmodo). The rest are major news sites (BBC, Wired, CNN) and Wikipedia. TechCrunch is No. 41 on BlogStorm’s Digg list.
The problem with this Digg Leaderboard is that it doesn’t filter out anything. It would be useful to know, for instance, which sites get linked to on Digg’s homepage the most, or on the front page of each of its topic sections. (Kevin Rose, are you reading this?) But this list doesn’t do that. Instead, it counts any link on Digg, even deep in the member comments. Since so many blogs and sites constantly put up their own stuff on Digg and actively campaign to get those links on Digg’s homepage, you’ve got to wonder how that impacts these rankings. Any Digg Leaderboard, for that matter, would be particularly susceptible to such spamming campaigns.
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