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Summary:

Digg, the social-bookmarking service that has been struggling to right itself after an ill-fated relaunch earlier this year, is laying off more than a third of its staff, CEO CEO Matt Williams announced in a blog post today. A senior executive is also leaving the company.

Digg fail whale

Digg, the social-bookmarking service that has been struggling to right itself after an ill-fated relaunch earlier this year, is laying off more than a third of its remaining staff and has also lost a senior executive to another startup. New Digg CEO Matt Williams — who took over for founder Kevin Rose in late August, and spent his first few days apologizing for the problem-plagued and much-criticized launch of the site’s new features — said today in a blog post that the company has “a burn rate that is too high,” and that it must “significantly cut our expenses” in order to achieve profitability in 2011.

Williams’ comments come just a couple of months after Kevin Rose, who was then CEO, said in an interview with All Things Digital that the company was close to turning a profit and didn’t need to raise additional capital, because it had “double-digit millions” in revenue and had broken even on a monthly basis several times. In that interview, Rose also admitted that he didn’t really like being the CEO and that he realized the company had a “very small window to really get things right” because of the competition in the social networking market. In his blog post today, Williams said that Digg would be unveiling “a new strategy” for growth tomorrow.

Digg launched a new version of the site just a week before Williams was hired, after more than a year of design and testing. But the launch was widely criticized by loyal Digg users, and the company spent the subsequent weeks rolling back most of the changes that it had made and apologizing for the upheaval. Meanwhile, traffic at the site declined sharply — perhaps in part because critics started promoting competitor Reddit.com by posting links to the Digg home page — according to an analysis by Compete. Digg has been under pressure for the past year or more as Twitter and Facebook have stolen much of the momentum that the company initially had as a place for users to share links to interesting content.

It remains to be seen whether cutting staff by more than a third — less than six months after the company reportedly cut its headcount by 10 percent — will buy Digg enough breathing room to recover from its recent woes, or whether the new strategy that Williams mentioned can help it turn the corner.

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  1. This is a welcome move. We all knew that even before the traffic spiral, Digg was unsustainable. I mean, c’mon, at some point you have to start making a profit.

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  2. Reminds everyone that “social media”, as a financial play, is built on very shifting sands. Facebook seems very, very solid these days, but it could be tomorrow’s MySpace. It just has to go out of fashion, or make one big software mistake, and blooey.

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  3. It’s the incredible shrinking company. I will remind everyone that this is the second serious bloodletting they have done over the past 6 months. This company is clearly headed for the deadpool!

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  4. Just read this on techcrunch. Its really sad to see digg reach this point. Hmmmm….

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  5. [...] leave the company in the past two days for jobs with other startups, and new CEO Matt Williams has slashed the workforce by more than a third, and says the company needs to “get back into startup mode.” But is such a thing even [...]

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  6. Sad to see the best social bookmarking service in problems. History says audience has always reacted very strong against website redesign changes and Digg has taken a giant step of making both design and core changes. And this proved fatal for the company.

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  7. digg was a good idea, but it had a lot of failure points.

    first of all, it relied on user input for sustainability. digg does nothing other than provide bookmarks, and it requires users to do the work. people will eventually realize that doing work without a payoff isn’t worth their time, and seeing your digg score go up a few points doesn’t actually mean anything.

    this also goes hand in hand with the fact that they rely on publishers to push out worthy content. if the writers aren’t doing a good job, then digg doesn’t have anything good to display. this hits digg hard in the fact that sooo many stories are repetitive.

    second, they are in a point to be heavily manipulated by corporate interests. what is to stop corporations from pushing their stories to the top of the list (via votes). if this happens, quality is assured to decline.

    third, you can find the big, fun stories on other sites. why do we need digg if a simple rss aggregator can do the same thing?

    i hated the fact that they got rid of their “images” page. that is the main thing i looked at when i went to digg. i don’t really like to watch videos, as they take too long, and i’ve already read the stories via my rss feeds (usually the same things). i haven’t been to digg in months because of their site revamp.

    they alienated their user base. they pushed a huge change, instead of using slow/small iterations of changes. there was a reason digg was a success; if it works, why change it?

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  8. “But the launch was widely criticized by loyal Digg users, and the company spent the subsequent weeks rolling back most of the changes that it had made and apologizing for the upheaval.”

    That is not true. They rolled back superficial parts of v4, but not the fundamental problems that caused the exodus.

    “Meanwhile, traffic at the site declined sharply — perhaps in part because critics started promoting competitor Reddit.com by posting links to the Digg home page — according to an analysis by Compete.” (Links to the joke of a rollout failure list that Kevin Rose posted http://kevinrose.com/blogg/2010/8/27/digg-v4-release-iterate-repeat.html , not an analysis by Compete).

    Yes, that is why – automobile takes over due to people standing around the horse dealerships saying everyone should try automobiles – yes, that is how it happens. No, Compete you dumbasses, digg betrayed their user base, user base found alternative home, user base let others know where to migrate to. Way to try to whitewash the whole thing into something it was not – please be more truthful about the cause vs the effect.

    Users should become _less_ tolerant of sites changes, usurpation of privacy, taking of users work to become property of the site, etc. Most sites add a very minimal amount of value to the user created content but make big money – there is no reason for users to tolerate being used to make people like Kevin Rose rich.

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