Digg, Once Valued at $200 Million, Sold for $500,000
Kevin Rose's once mighty startup purchased with plans to fold
Kevin Rose, Co-Founder of Digg, on the cover of Business WeekDigg, the one time social sharing darling, with an estimated value of over $200 million in 2008, has been sold for a paltry $500,000 to New York based Betaworks.
The cautionary tale of Digg is not an uncommon one, and should be of concern to investors looking to get into the social media scene.
As of a couple of years ago, Digg was considered one of the hottest startups, founded by member of the tribe, Kevin Rose, who adorned every every magazine cover from Business Week, to Inc. and many others, and was one of the wonderboys of Silicon Valley. But much like the story of MySpace, which was started by a fellow Jews, Tom Anderson and Brad Greenspan along with Chris DeWolfe, the final chapter of Digg was not a pleasant one.
MySpace, at one time the most popular social media site in the world, and the most visited site on the internet, even surpassing Google, sold to News Corp in July 2005 for $580 million. From there, the progress of the site could be charted as a straight downhill slope, eventually leading to the sale of the company to Specific Media LLC and Justin Timberlake for $35 million in June, 2011.
Digg, much like other businesses in the industry that show some hope, raised massive amounts of money from investors, over $45 million since launching in 2004. The company is now expected to be folded into News.me.
In recent years Digg has run into serious operational trouble, which had many people foreseeing its eventual downfall. There were various relaunches which were met with mixed to poor reception, plummeting traffic, lost revenue and the eventual step-down of Rose, who left the company in March 2011.
How many more overvalued-internet-darlings-to-bankrupt-disasters will it take for investors to re-examine the way they look at these businesses before investing? Will the eventual collapse of Twitter, Pinterest or another giant be the wakeup call needed?
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