Webware

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.

Digg has always made its message clear: it's not social news, it's democracy.

The company's executive team--founder Kevin Rose, and CEO Jay Adelson--thumbed their noses at the DMCA complaint they received when users "dugg" a crack code for the now-defunct HD DVD technology. They also decided to connect with their users through "town hall" events Webcast live four times a year. So it's perhaps fitting that for the company's third quarterly town hall, Rose and Adelson set up shop in the "Big Tent" new-media hall at the Democratic National Convention in Denver. (Digg is a "Big Tent" sponsor.)

It'll be following up with an event held in partnership with MySpace at the Republican National Convention. The company also kicked off a "Digg Dialogg" event series, in which executives ask users' questions to prominent guests. Adelson, who called it a "perfect alignment of Digg and elections," interviewed House of Representative Speaker Nancy Pelosi in the inaugural interview, in partnership with CNN's iReport.

"They're your raw questions," Rose said, his characteristic mop-top haircut forsaken in favor of a buzz cut. "They were completely unfiltered."

To be fair, Digg owes a lot to politics--its energetic base of news hounds loves election coverage, and the national elections inevitably pull a lot of traffic to the site.

The questions were largely technical ones that dealt with the minutiae of Digg culture: Adelson said that the "shout" communication system will be tweaked to limit spamming and a private message system is on the way, better technology to flag duplicate stories ("I hate this!" Rose said on the problem with duplicate story submissions) is coming this fall, and Digg is working on a way to let members flag stories as "not safe for work."

Most of Rose and Adelson's answers, which they breezed through more quickly than with previous town halls due to time constraints on the Denver stage, fell into the niche of "good suggestion, and we're working on it."

One question asked if Digg could institute a forum for members. That was a more contentious point for the company executives. "We do want to have forums for our users to communicate and support each other," Adelson said, but added that he's working on matching up the authentication system so that it uses the same credentials as Digg itself rather than an external forum system.

Rose was less enthusiastic. "Everyone has forums and it's always the same crap," he said. "It doesn't necessarily mean that they're helping elevate the good questions and helping the conversation come through."

A few genuinely good ideas came up: one question suggested "geotagging" for stories to group them into local news stories, something that could make the site legitimately compete with sites like Outside.in and city blog networks like Gothamist. "Yes," Rose said. "We've thought about this as well and it would be really cool if we could start to group different events around you." Adelson added that Digg has "a few projects on the way...think 2009, realistically, for some of this stuff."

Despite the somewhat dull nature of many technical questions about recommendation engines and comment improvement, Adelson and Rose insisted that those are the questions they want to hear because it's where Digg users can really make a difference in shaping the site's direction. "It's really important to know what you guys are thinking. It keeps us honest," Adelson said.

The next Digg town hall will be held on November 6--two days after the U.S. presidential election. Its next meetup, however, will be off American shores: Rose will be taping his Diggnation podcast live from London on October 10.

Social news site Digg, a perpetual target of acquisition rumors, normally addresses the "is _____ buying you?" questions with a "no comment" answer. Not this time.

Jay Adelson, the company's CEO, posted a blog entry on Friday in response to a rampant rumor that Microsoft, Google, and two major media companies were placing bids on the hot start-up's price tag. A sizeable number of avid Digg users were thrown into panic mode over the prospect of a corporate parent. Adelson appeared to deny the rumors outright.

"Normally our policy is to not comment about things like this," Adelson wrote, "but this morning's rumors about a bidding war involving Google and Microsoft have created such a stir we feel compelled to tell you all directly that they are completely inaccurate."

He continued: "Sorry to burst any drama theories, but they aren't true. We remain focused on improving Digg and rolling out great features."

But Adelson could be acting a bit cagey here. The original report on TechCrunch never mentioned a "bidding war" per se, just that four companies were in the running to acquire the company. The "bidding war" phrase in Adelson's post could have referred to embellished rumors and speculation that subsequently floated about the Web. I've e-mailed Adelson to ask him to clarify whether he's willing to debunk the entire contents of the post.

I'll update this when I have a response.

On Monday night, social-news site Digg took a new approach to its famously clamorous users: CEO Jay Adelson and founder Kevin Rose sat down in front of a Ustream-connected camera with their MacBook Pros and a couple of beers and answered questions that had been submitted by Diggers.

As a relative outsider to Digg culture, I was fairly dissatisfied.

All in all, the session highlighted quite a few of Digg's strengths as well as troubles going forward--and additionally reflected a few common criticisms about the site as a whole. But in the process, the questions were inward-focused, dealing with the demands of an active but demanding user base. Very few dealt with Digg's place in the Web's landscape or new media industry as a whole.

Digg, like a handful of other social-media sites (Yelp and Vimeo come to mind), has become famous for a notoriously tight-knit community. On one hand, that's a sign of success. It's got a really dedicated user base. On the other hand, it invokes claims of cliquishness and complaints that it's hard for an outsider to break in.

Watching the town hall, those complaints seemed pretty grounded. Right off the bat, the 20 questions selected were chosen because of the numbers of Diggs each question amassed in a thread about the town hall. True, that's keeping it in the community, and Digg is all about the community. But it's also a bit incestuous, and the questions could have fallen prey to Digg's alleged insideriness--voting up a comment or story simply because of who posted it or submitted it, not because of the content of the stories.

And consequently, the vast majority of the stories were about the nitty-gritty details of the site, the sort of thing that would be of importance to a daily Digg user but which would be inconsequential at best (and potentially nonsensical) to an outsider. I'm not a top Digger, but I'm more than familiar with the site. Digg's users, for better or for worse, also happen to be a tech-savvy bunch. That means a tougher job for Adelson, Rose, and the rest, as the users will be more likely to demand upgrades to the service, insist on a better user experience, and the like. That's good; I'm tired of seeing Web 2.0 sites thinking that they can get away with perpetual beta phases and poor performance.

But on the other hand, Digg can't simply look inward because legitimate competitors have begun to surface. One of them, Mixx, just raised several million dollars in venture funding. None of the questions addressed on Monday night dealt with Digg's opinion of its competitors, plan for moving forward in a tough economic climate, or where Rose and Adelson see the site in five years. Granted, that's not their fault; the questions about "super-users" and comment system upgrades were, after all, what the users Dugg. But I sat through question after question about minute upgrades to the Digg comment system when I really wanted to hear about Adelson and Rose's collective vision for the site going forward.

One question did touch upon the constant gossip that Digg will get acquired. For obvious reasons, Adelson and Rose declined to comment. "We get asked this every day," was Adelson's response. "We are laser focused on the features that users want us to do, and frankly that is what we're focused on as a business right now."

Digg does have a great model for social news that, in my opinion, hasn't yet been paralleled by any other site. But it's in a bit of a Catch-22: ignore or deceive its community, and it faces mass backlash; but pander to its community too much, and it hinders its opportunities for growth as it focuses too far inward. I wanted to hear vision. I wanted to hear partnerships and developments and possibilities. What I heard instead was the gradual upgrading of the search algorithm. Maybe, because I'm not a hardcore Digger, I just don't get it.

But I appreciate that Kevin Rose is a fan of Chimay Red ale.

This post has been updated with comment from Digg CEO Jay Adelson.

Valleywag reported on Wednesday afternoon that a "major media player" was close to plunking down $300 million to $400 million for social news site Digg. Valleywag editor Owen Thomas wrote that "a source rules out all the big Internet players--not Microsoft, not Google, not Yahoo, not News Corp.," and that CBS had "taken itself out of the running."

Thomas went on to speculate that perhaps the buyer for the Kevin Rose-founded Digg would be the New York Times Company or the Washington Post Company. Social news and bookmarking sites have indeed proven to be hotter buys for media companies rather than technology companies, with Conde Nast's acquisition of Reddit a year ago and Forbes' very recent purchase of Clipmarks--the exception is Delicious, which Yahoo bought.

This should be taken with more than a grain of salt--OK, an entire margarita's worth of grains of salt--but here's an interesting tidbit. I was talking to Digg CEO Jay Adelson at Tuesday night's Founders Club party, and he sure didn't say anything that hinted at an acquisition (obviously). But Adelson, who is a New York resident, did say that he wishes the company had a bigger East Coast presence.

Adelson told me in an e-mail on Wednesday afternoon that neither he nor Digg would be commenting on the acquisition rumor. But considering how many "major media players" are based in Gotham, this still could be saying something.