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Digging on Digg: Early Days on A Deal

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Over the holidays, the rumors about the sale of Digg, the social news site, cropped up again, like many times before. Only this time, it has hired Allen & Co as its bank, and is doing the rounds seriously. We have confirmed that the usual suspects like Yahoo (NSDQ: YHOO), CBS (NYSE: CBS) and others are looking at it, though most of them said its hopes of a $300 million valuation are on the very high side. There is still some way to go before the process gets completed one way or the others, sources say. On CBS, any deal would be interesting in light of its decision to trim staff at and CBS Interactive’s continued focus on community sites.

Meanwhile, in an interview with Times UK, CEO Jay Adelson said Digg’s revenues were good and that the site, which has raised $10 million from Greylock and others, would not need more money before turning a profit, but declined to say when that would be. It did sign an exclusive deal with Microsoft (NSDQ: MSFT) earlier this year for display and contextual ads on the site, so that probably helps on the revenue side.

Staci adds: IAC (NSDQ: IACI) has been kicking the tires, too … $300 million is pretty rich but the traffic could come in handy. Digg fits in with the community vision at CBS Interactive and the money is doable but turf wars over make CBS an iffier prospect. FIM (NYSE: NWS) would be a usual suspect but given that Rupert Murdoch said no at $140 million (cash + earnout) back in 2006 — as a deal was nearing final approach, according to one source — so hard to imagine him paying more than twice as much now.

2 Responses to “Digging on Digg: Early Days on A Deal”

  1. We've been hearing about Digg trying to break into the mainstream market for a long time now, but nothing has materialized. Most people outside of techies and early adopters have never even heard of Digg. This is a company that really revolutionized the 'wisdom of crowds' concept and brought it to online news, but $300M sounds too good to be true. I wish them luck though…

  2. cannot imagine this property getting bought for more than $100m. My guess is that much of their traffic comes from Internet insiders, techies, etc. and very little from mainstream Internet users. Perhaps they can *somehow* break into this group but not without a lot of help and luck.

    They are the classic one-trick pony and, despite having Allen & co. on tap, they have a tough story to tell if they really want $300M.