The Social

Facebook has partnered with liberal news outlet The Huffington Post in an officially sanctioned implementation of its Facebook Connect product.

Called HuffPost Social News, the new site aggregates Huffington Post stories that a given user's Facebook friends have recommended or commented on, and shares the user's Huffington Post activity on their Facebook profiles in turn.

It's a concept fairly similar to TimesPeople, the sharing service that The New York Times launched last year.

"Our goal is to make HuffPost Social News the go-to place for Facebook users to share news--both the stories they love and the stories they hate--with friends," Eric Hippeau, Huffington Post's still-new CEO, said in a release. "It should also appeal to marketers interested in reaching passionate, savvy readers who care about the news and who want to share their interests with friends."

This use of Facebook Connect is unusual because Facebook typically does not undertake many official partnerships with third-party sites when it comes to its developer APIs. And this particular partnership may come under some scrutiny: The Huffington Post, which began as a political news site and has since expanded into many other areas of coverage, is controversial--not only in terms of its partisan leanings (it was co-founded by left-of-center pundit Arianna Huffington) but because the majority of its bloggers are unpaid and because some critics have argued it relies too heavily on third-party content that it doesn't always pay for.

But the social network's executives appear to have given The Huffington Post their stamp of approval, at least when it comes to the site's model for news consumption.

"The Huffington Post has led a revolution in how people discover and consume news," Facebook Chief Operating Officer Sheryl Sandberg, herself a veteran of the political world, said in a release. "With the integration of Facebook Connect, HuffPost Social News is now leading the way to make news even more of a social experience, giving people new ways to share and filter news and current events through their networks of friends on Facebook."

Facebook likely hopes that this partnership will be a sort of example to the news industry--which is obviously looking for some new ideas right now--and that other media outlets will, in turn, build similar products.

Social-news site Digg has ended its advertising partnership with Microsoft more than a year before the deal was set to expire. Instead of relying on Microsoft as its exclusive ad partner, Digg will now primarily use the internal sales force it recently began building; Microsoft will handle remnant inventory.

"Starting July 1, Microsoft will sell network inventory for Digg through the Microsoft Media Network, which it has been doing successfully for the last year and a half," a statement from Microsoft read. "Digg has created its own internal sales executive team, and we respect their decision to sell their owned-and-operated site inventory directly to help further accelerate their growth as a company."

Digg's contract with Microsoft, intended to be a three-year deal, started in mid-2007, when the company chose it over Google. At the time, founder Kevin Rose applauded the decision because it would let Digg's employees focus on feature development while leaving ad sales to a more experienced team.

The revised contract is a blow to Microsoft, which touted the Digg deal as a big victory at its debut. But it also is yet another signal that advertising on the Web is changing significantly.

According to a ClickZ report, Digg's internal sales team will focus on "custom, non-IAB (Internet Advertising Bureau) inventory combined with standardized banner ads." This strategic decision--to move away from a reliance on the traditional IAB display units that have defined digital advertising for years--comes at a time when the best way to advertise on a social-media site is a matter of debate and uncertainty.

Social network Facebook also has a display ad contract with Microsoft (in addition to a $240 million investment) but has been putting more emphasis on the experimental "Engagement Ads" product that it packages and markets in-house. The News Corp.-owned MySpace, meanwhile, relies more heavily on traditional display ads.

By most accounts, MySpace is ahead of Facebook in the monetization game. It has a bigger foothold in the United States, where ad dollars are easier to come by than overseas, and it's willing to make advertising significantly more pervasive with full-page "wrap" campaigns--not to mention the fact that it has News Corp.'s media connections.

But with Digg choosing to go the Facebook route (sort of), especially given the bleak advertising climate, this could be a sign that more players in the tech industry have started to regard the next generation of digital ads as a more profitable route.

"It's not unusual for someone in the social media space to have a lot of custom units, because they're forging new territory," said Debra Williamson, a senior analyst at eMarketer. "A lot of people say that by the time the IAB comes out with a standard, the ad format is, (while) not necessarily passe, certainly not the cutting edge."

Williamson noted that not only is Digg changing its ad focus, it's looking to make new hires to expand its team. "That does put a stake in the ground, and it does say that a company like Digg is serious about looking beyond the banner, so as to speak, that they're really looking to develop new ways of advertising and that they're looking to bring on new people to help them do that."

Whether or not Madison Avenue will agree is a different story.

This post was expanded at 1:15 p.m. PT.

This post initially misstated Digg's 2007 loss as reported by 'BusinessWeek.' The company reported lost $2.8 million in 2007.

There are some stunning numbers in BusinessWeek about social news site Digg: In 2007, the company reportedly pulled in only $4.8 million in revenue and lost $2.8 million. In the first three quarters of 2008, it lost $4 million on $6.4 million in revenue.

Digg declined to comment on the numbers.

This is a little bit disconcerting, if true. Digg has been one of the hottest start-ups in Silicon Valley's hype machine for the past few years, due ironically in part to an August 2006 BusinessWeek cover story depicting boyish founder Kevin Rose giving a grin and a thumbs-up. (What innocent days those were!) It's also been vocally committed to growth, and has said that it's still hiring in the midst of the current recession.

(Credit: BusinessWeek)

When Digg raised its last round of funding--a $28.7 million Series C in September--rumors pegged its valuation at around $164 million. That's significantly lower than the $200 to $300 million that was occasionally talked about in those pesky acquisition reports.

Which, by the way, we haven't heard many of recently. It used to be, per the gossip mill, that either Google or News Corp. or Microsoft or somebody else was trying to nab it; Al Gore's Current Media reportedly offered $100 million in 2006 and was snubbed.

Digg has a wild cult following, and Rose's background as a TV anchor and popular "Diggnation" podcast have turned him into one of the Web's biggest celebrities. And its traffic, by all accounts, continues to grow steadily as Digg makes strides to expand its base beyond the geeky young newshounds who made its community famous.

CEO Jay Adelson says he's cracking down and now aims to make the company profitable in one year rather than two. Considering what BusinessWeek has dug up this time (pun completely intended), that could be a tough task.

Jay Adelson, CEO of social news company Digg, has used a BusinessWeek interview to attempt to quash those long-standing acquisition rumors. From what he said, Digg is not for sale.

"Now I am pressured to keep costs reasonable and focus more on the top-line revenue, which we really haven't done ever," Adelson said to BusinessWeek's Spencer Ante, saying that he now hopes to make the company profitable in one year instead of two.

Not for sale? Riiiiiight.

It's an old (ha) Silicon Valley maxim that any company is for sale, assuming the right buyer comes along and offers the right deal. What's likely is that Digg has come to realize that in this economic climate, it's not going to get the price that Adelson and founder Kevin Rose want.

Digg raised a whopping $28.7 million in Series C funding in September, which Adelson and Rose said would go toward fueling a major site expansion. The company didn't disclose a post-round valuation, but VentureBeat heard that it was only $164 million--significantly less than the $250 to $300 million prices that were oft-whispered about in Valley social circles.

Here's my theory: The longer Digg waits for the perfect bid, the longer it's in danger of having its valuation chipped away. The truth is, it's not very difficult for a site to institute a "social news" feature or other form of Digg-like interaction. Current Media, after Digg spurned an acquisition offer, built Current News and now aggregates user-picked stories into an hourly TV show. Yahoo built Yahoo Buzz, which can propel stories to the front page of its portal. Some Google users occasionally report seeing experimental features in which they can vote on search results. There are smaller ones, too: Reddit, which sold early to Conde Nast, is still alive and kicking. A start-up called Kirtsy puts a girlier spin on the Digg model.

Adelson even remarked to BusinessWeek that buying some of these smaller social news sites could help make Digg stronger, especially now since the recession may make some of them dirt-cheap. "There are Digg clones around the world in every country," he said to Ante. "I could go into those markets and clean up those sites. If I needed more capital to do a deal, I could probably do it."

That, honestly, wouldn't be such a bad idea. Digg's biggest problem isn't user activity--it has one of the most loyal and addicted audiences on the Web--but the fact that its core user base is very niche. It experienced a surge in political traffic as election season rolled on, but its core is geek news; hot topics right now are screenshots from the movie Wolverine and airborne laser weapons.

Social news site Reddit, which was acquired by Conde Nast's Wired Digital division two years ago, has announced the start of a new strategy to distribute its technology around the Web. It's partnered with the U.K.'s Independent newspaper to install Reddit technology on its Web site and encourage readers to vote up and down on the news.

While a prominent button for the Independent's internal voting system will appear on each of the publication's online news stories (these will show up in a few weeks), it will also accept links submitted from around the Web.

"It's this kind of open mentality that really excited us about working with them," co-founder Alexis Ohanian said in an e-mail.

Reddit opted to make its code open-source in June, an announcement that would presumably lead to the kinds of deals that the company announced on Thursday. It's far smaller than rival Digg, but seems to have a clear message in place: that Reddit is about distribution, not a standalone site.

Digg founder Kevin Rose, in a photo taken at the last Future of Web Apps conference in Miami.

(Credit: Caroline McCarthy/CNET News)

LONDON--In the first part of our interview with Digg founder Kevin Rose at the Future of Web Apps conference, CNET News asked the Web start-up poster boy about everything from the company's Series C funding round to whether he's concerned about when those election stories stop rolling in.

In part 2, Rose got a little more specific: What would happen if Digg got hit with a stock-plunging news hoax? Will he be making acquisitions? And most importantly, does "digg" mean anything dirty in any foreign languages?

CNN had that big debacle with a user-submitted story, about Steve Jobs having a heart attack, which turned out to be fabricated. What's your policy for what happens if something gets "dugg" that isn't true and which could have a big impact on stock performance or elsewhere?
Rose: The good news is that we have a lot of people that are actively looking for that and who flag and bury content based on whether or not it's inaccurate. There's probably not a day that goes by that there isn't a piece of content flagged on the site as inaccurate.

Do you employ anyone to keep tabs on that?
Rose: No. This is all done by the masses. We're fortunate enough to have millions of people come to the site every day, and thousands of people vote. (They can say), "this is bad," and we can apply that tag to it. We'll display a little stamp that gives a warning that the community has flagged it as potentially inaccurate. We see that every single day.

If a company serves a takedown notice because something was dugg about them that isn't true, would you comply? In the past you've been very vocal about not interfering with the community.
Rose: We'll only take things down that we receive like DMCA cease-and-desists that come to us. Often it's something like that there's a link to a pirated copy of Photoshop. But normally that sort of thing gets buried on its own because users won't promote piracy directly...We get a few a month but it's never a big deal because it's usually just blatant piracy.

So talk about internationalization. It's coming late next year. As a bit of a hint, are there any countries where Digg is extremely popular and a language translation might make sense?
Rose: Well, London is our largest city overall. But outside of that, as far as different languages are concerned, there is demand from certain users coming in and writing to us, but we see a lot of Digg-type clone sites, and those are the ones that we kind of keep tabs on. So we say, OK, where are our competitors and how are they doing? There's a Spanish version of Digg, there's a German version of Digg that's called Yigg or something like that.

And they're unofficial, or do they use your API or anything like that?
Rose: They're unofficial. They do their own thing. And then there's also a Digg in Japan that has some traction as well. So we look at this stuff and we say, OK, what do we do? Do we open up a version of Digg out there? Do we acquire these companies? It's all stuff that we talk about and I think that where you'll see this expand first is a combination of both requests from users and where our competitors are starting to take off.

So you might acquire a smaller competitor?
Rose: Sure, potentially.

Would you look at all into "crowd-sourced" language translations that we're seeing on sites like Facebook and Hi5?
Rose: The translation, we don't have a ton of things that would need to be translated. It's not like we would be translating the U.S. submissions. It would be their own submissions and a whole separate engine running an instance of Digg outside of our own, but still connected so that you could go to the U.S. version of Digg and it would show up in your profile and everything. But yeah, I don't think we're that far along. Right now we're just looking at different areas and where we want to expand and the code that will be needed to make that happen. It's all stuff that we'll be doing over the next couple of months.

Do you have any offices outside of San Francisco now?
Rose: We have a small group of people. We have someone that's working for us in Scotland and also someone that's working for us in Amsterdam. No official Digg logo on the side of a building anywhere.

So do you have any plans to open more offices?
Rose: I'm sure, eventually.

When you expand internationally, you're not going to have to change the name of the site or anything? It doesn't mean anything offensive in any language?
Rose: Somebody told me it did in one language. I can't remember what it was.

Your talk today was about the future of news. How do you see yourself in the news industry as a whole, beyond the niche of social news?
Rose: I don't know that we do actually. I think we're just kind of that platform to level the playing field. We will never become a news publisher in any way, in that we won't produce our own content or host other peoples' articles. We'll always be kind of directing the flow of traffic.

When you expand into other countries and if you launch localized versions, are you planning to have to deal with governments that may not agree with Digg's views on freedom of information?
Rose: Absolutely. I think that we have always wanted to create a neutral, level playing field, and I would not be OK with changing that point of view when it comes to Digg. I'm not going to bend our rules when it comes to story promotion or our algorithms that look for a unique, diverse crowd of people thinking that something is interesting, and wouldn't allow anyone, any government to manipulate that. That might mean that we can't actively compete in some markets, but those are kind of our core principles, and those will never be compromised.

You were talking a lot about how you've got a ton of data that you haven't sourced out yet. Have you thought at all about adding an additional revenue stream by licensing analytics to clients?
Rose: Yeah, one of the big things that our business development team spends a lot of time working on is relationships with publishers. They're constantly coming to us and saying that (we) have a lot of data about their users--what they do, what they enjoy, where they're coming from, what other articles and other sites they're posting on--and it would be cool if we could get some of that data into a type of dashboard.

That's all things that we're looking at as far as tools for publishers, like some of the other things I mentioned today like a recommendation engine for publishers. It's definitely on the road map and it's stuff we want to develop, but it's just important that I'm not going to build a custom suite for CNN and not provide it to a blogger. I just want to make sure that when we do build a tool, it's available to everyone.

At this conference, there are a ton of young independent developers eager to learn. Given this financial climate, things are tougher when it comes to getting venture funding or getting a job. What would your advice to them be?
Rose: E-mail us at jobs dot digg dot com. (Laughs.) You're absolutely right in that I've talked to a lot of investors recently, some of our angels, a couple of VCs, that I know and communicate with, and it's definitely a weird time right now. Start-ups that don't have traction and don't have that kind of hockey-stick-like growth on Alexa or Compete or whatever are going to have a really difficult time raising an additional round of funding. I think that a lot of the advice going out there to start-ups right now is to pare back a little bit and get into a mode that you can survive in.

There's a way to, they call it, "raise an internal round" of funding just by cutting back on things that you don't absolutely need. Cut that out of the budget and it's like raising money because you're not spending it. I really unfortunately think that there's going to be a lot of start-ups that go by the wayside in the next 12 months. The advice I hear out there is that if you can raise money, now's the time to do it and then just put your head down for the next couple years. I know a lot of start-ups are trying to do that.

LONDON--Perhaps it's fitting that Digg founder Kevin Rose chose the Future of Web Apps conference here as the place to elaborate on his company's international expansion strategy. London, after all, has become the San Francisco-based Digg's biggest hub of user activity. But with headlines dominated by financial disasters, life gets a little more complicated for a company determined to build up and keep hiring.

CNET News caught up with Rose shortly after his presentation on Thursday morning. Here's the first part of our two-part interview.

You're a geek hero. You've got a huge following. How much do you want to be "the Digg guy," especially as Digg is expanding and moving beyond its roots?
Rose: Well, I absolutely love my job. It doesn't feel like I'm working, ever, so that's a nice place to be in when you've spent the last four years feeling like you don't have a job and it's just something you enjoy doing every day. So I don't think that's going to get old for quite some time. I'll be at Digg for a while.

Digg founder Kevin Rose, who has since gotten a much shorter haircut.

(Credit: Caroline McCarthy/CNET News)

So what about being such a cult figure (as host of the Diggnation podcast)?
Rose: There's a lot of people that watch our podcast, and enjoy our podcast and say, hey, you know, you guys are funny because we get there and drink beers and comment on our favorite technology and geek-culture stories, so there's that group of people who enjoy what we do as far as making the podcast. I don't know, I'm just happy that people watch and that people enjoy what we're doing. Alex (Albrecht, Diggnation's co-host) and I, when we started the podcast, we really didn't have any idea how many people were going to be into it. We were just, like, "Hey, we used to work together at TechTV, why not just do something fun and hit record?" Even if nobody watches we'll still continue to do it because we like hanging out.

You said earlier this morning that Digg's going to focus on expanding its appeal, that right now only a tenth of Digg's visitors have registered for user accounts. Is Diggnation going to change, too?
Rose: No, Diggnation will always stay the same. It's just kind of a fun show. Only a small percentage of the people who watch Diggnation actually go to Digg, there's only about 250,000 people per week that watch Diggnation, and Digg has millions and millions of people. So it's not like they're really closely tied together.

You said you're going to stay at Digg for a while. You just raised a big Series C round. Does this mean the company's going to stay independent (i.e. not get bought) for longer than originally planned?
Rose: The nice thing about the last raise is that it wasn't, like "oh, we're out of money, we need to raise more," it was more based on the fact that we knew we wanted to expand into different languages and we knew we had to buy racks of servers over in Europe, and all that takes capital to make happen.

We sat down and said, okay, where do we want to be a few years from now and what are the resources that we need to make that happen? We would've ran out of cash had we executed on that plan to expand internationally. That raise was really, okay, let's build the team that we need in San Francisco to continue to evolve the product, and invest in R&D and continue to scale the site, but at the same time let's talk about international next year. So that's what this is for.

What about other social news sites? Are any of them doing things that Digg isn't that you're hoping to emulate in one way or another?
Rose: That's a good question. I really don't use anybody else's product. I've never used their services at all, I think I've maybe "buzzed" one article when (Yahoo Buzz) first came out. We don't really base our product decisions on what anybody else is doing.

But there's been no instance where you saw something really cool and wished you'd thought of it first?
Rose: I've seen some really interesting mashups of other peoples' data that are really fun to play around with, and I've thought it would be really cool to see what Digg data looks like with that, but I can't think of any one feature. I think some of the stuff that StumbleUpon is doing with their toolbar and providing recommendations in the toolbar is really interesting to us, but not right now. We have a very basic toolbar right now today.

How has the current financial situation changed things at Digg? That stuff really started to unfold right after you raised your Series C round.
Rose: Nothing's changed. One of the nice things about Digg is we've always run fairly lean. We have a small team and we're a very text-heavy site, so as far as bandwidth is concerned it's not like we're YouTube spending a million dollars a week on bandwidth. For us it's just always being conscious of who we're hiring and why we're hiring them, and do we need that person or not. We won't be a 400-person company in a year or two years. It's just picking the spots where we need some help and growing slowly, and staging that growth so it mirrors our own Web traffic growth...it's always been out of necessity.

Are you anticipating a traffic drop after the election?
Rose: We don't anticipate that, no. That's a good question though...we've always seen traffic grow month over month. We're fortunate enough to be in that position, and we've seen the different bumps as little things that come along. When the Olympics was going on we saw a little bump ther. When there's big tech news or Apple events you always see bumps there. We'll have to see. We haven't really done any estimates on that.

LONDON--Digg founder Kevin Rose had a message for the audience at the Future of Web Apps conference on Thursday: It's time to grow up.

"We have to do better," he said in his talk, called "The Future of News," and said that it's time for the social news site that he founded in 2004 to to expand beyond the geek set and get some real-world relevance. "Why click a button and make the number go up by one? Why does that matter?"

Digg, after all, gets more than 30 million monthly visitors, but Rose said that the site only has slightly over three million registered user accounts--those are the people actually "Digging." That indirectly confirmed what Digg critics hve been saying all along: that it's reflective of only a tiny and vocal subset of the Web, resulting in a heavy bias toward anything iPhone, anything Linux, anything Barack Obama, and plenty of wacky local news stories.

As a result, Rose explained, Digg's strategy going forward--one of the reasons why it raised $28.7 million in a Series C round last month--is to make the service more relevant to the average user. Digg has started to experiment with personalization and recommendation, something that Rose frequently discusses in his town hall Webcasts with the company's CEO, Jay Adelson. Introducing a "similar users" feature on the "upcoming" page of Digg increased friend adding fourfold and Digging by 40 percent.

Rose, who has ditched his trademark shaggy coif for a more mature buzz cut, didn't actually talk much about the future of news beyond Digg, but implied that he hopes Digg will be an industry example for the ongoing evolution of something much broader. He also didn't say anything about the pressures of an unfriendly economic climate, but his down-to-business attitude suggested that he realizes things aren't just fun-and-games for Web 2.0 anymore.

The impetus right now, he kept stressing, is to make a social news site personally relevant.

Digg has a lot of data that it hasn't opened up yet, and that it will start rolling out to the public to make the site more relevant for average people. Pooling users into "dynamic" groups by interest is paramount, as is customizing the site for people who might not want all those stories about iPhones and Barack Obama. Beyond that, there's more: Digg has used internal algorithms to identify what Rose calls "prescient users," or tastemakers who have a high probability of Digging something early on that will eventually become very popular.

One person in the audience asked Rose whether catering to uber-niche interests will actually be a negative force for Digg's young users, narrowing their worldview. Again, Rose said that the expansion of the site will provide all kinds of opportunities: filtering Diggs by regions of the world, for example. Internationalizing the site, on that note, is also a big goal, and should start to roll out late next year. And though the site now relies on its display ad contract with Microsoft, "Diggable ads" in some form will eventually help Rose's company make a few extra bucks.

But Rose, a bona fide geek hero, assured the audience--a crowd of developers mostly from the U.K. and elsewhere in Europe, many of whom looked like they were young enough to be skipping school for the conference--that Digg won't lose its wacky-news cachet as it matures and expands.

"We truly believe the front page of Digg will always be that random (and) crazy," Rose said. "We don't want to get rid of that."

Social news site Digg has raised $28.7 million in a Series C venture round led by Highland Capital Partners, and has in turn announced a major site expansion.

"Today is a big day for Digg," CEO Jay Adelson wrote on the company blog. "We're announcing a major expansion effort--the largest we've undergone in our history. With a new round of funding, we're accelerating many of the programs that we've been working on over the past several months, including investments in infrastructure, new feature development, international expansion and hiring all the people we need to get there."

The expansion in question will encompass many of the features that Adelson and founder Kevin Rose repeatedly talk about in their quarterly town hall Webcasts. Additionally, the site plans to explore geographic expansion options, including translating Digg into languages other than English, and "significantly" expanding the size of its San Francisco workforce.

Digg had long been rumored to be up for sale, with buyers from both the media and Silicon Valley sides of the aisle reportedly interested. The company walked away from a $100 million offer from the Al Gore-founded Current Media, which eventually launched an in-house social news service called Current News. News Corp., which acquired MySpace in 2005, has also been mentioned as a potential suitor, and there always seems to be a rumor that Google has wanted to buy Digg.

The company has not disclosed a post-funding valuation. But it's rumored that even the most attractive buyers weren't willing to offer a dollar value that Digg's executives wanted, so it's possible that a bigger valuation--in addition to helping it weather an increasingly difficult economic climate--could make it easier for Digg to insist on a price. Whether Digg has given up on a sale for the time being, or is still trying to make itself more attractive to a buyer, remains to be known.

For more, see Rafe Needleman's interview with Mike Maser, Digg's Chief Revenue & Strategy Officer.