10 Ways Digg Could Stay Profitable and Independent

Businessweek reports that Digg is no longer up for sale:

In an interview with BusinessWeek, Digg Chief Executive Officer Jay Adelson says the popular news aggregation Web site is no longer for sale, and the focus of the company is to build an independent business that reaches profitability as quickly as possible. (Ed.: A Google offer fell through earlier this year.)

Among the new efforts: The company recently started to sell ads on its RSS feeds. It is on the verge of launching a revamped version of its homegrown search engine that the company hopes will produce more relevant and profitable search advertisements. And it is within a month of closing a deal with a mobile ad provider to sell more ads on cell phones.

Over the next few months, Digg will introduce new features that the company hopes will entice users to stick around the site. One opportunity is to make the site more social and expose users to more content that they are likely to find appealing. If the strategy works, it could help the company generate revenue as users click on more pages.

Moreover, with $28.7 million in new venture capital raised this past September…Digg is now considering making its own acquisitions.

I found the BW article on Digg.
Many commenters valued Digg’s community-driven aspect, but nobody came up with good ideas to monetize it.

CEO Jay Adelson jumped into the commenting mix with this remark:

The article is about our drive for profitability… The business is doing well, we’re just emphasizing our priorities in this market. Frankly, I’m more curious what folks thought of the rest of the article.

Jay, how is the business doing well? Are you saying that three big flash ads on Digg’s homepage are driving the entire company? What about business partnerships–how are they paying off? Certainly, big bucks aren’t coming from the Digg Store or Digg Mobile.

As far as I can tell, Digg gets some revenue from ads (including AdSense), but its expansion plan is purely VC- and angel-driven.

Increased advertising will sustain, but not drive, Digg. The company can increase its user base through acquisitions and cross its fingers with ads, but without a bigger vision, Digg won’t stick around, assuming the plan is to stay independent.

Google became the giant it is today through ad revenue, but its focus was always on innovation and expansion. When Digg says it plans to put up more ads, I can only assume it wants to stay alive long enough to be bought out. How will Digg harness its incredible user base? How does it plan to expand its backend and front-end offerings in ways that increase revenue streams? Where’s the plan?

I imagine Digg isn’t out to become a Yahoo-like portal or another spam-ridden social networking site. But it still has options that would help it innovate while it expands:

1. Partner with newspapers and traditional media.
Sell back-end software that enables users to digg or bury content, adding to the dynamic quality of newspaper and magazine homepages. Print is dying. Traditional media needs to innovate. A Digg partnership would provide them with the tools to do so.

2. Allow users to sell and rate stuff at the Digg Shop. Digg won’t become the next Amazon, but that’s not the point. Surely some users will sign up.

3. Let users create books of their favorite articles and self-publish them
through a partner site agreement. Print is dying, but people still like scrapbooks. Digg gets a percentage of the revenue for every book published.

4. Add paid article listings. Google’s premium advertisers, listed at the top of each search results page in a long shaded box, make the company big bucks. Digg should offer several sponsored article slots–made clear through a different font and a “Sponsored Article” tag–for a price. They won’t take up much space, payment will guarantee top placement, and the bulk of articles will remain user-driven.

5. Offer custom reports and analytics tools to frequent users–for a price.
Digg could take advantage of blogs and other sites whose revenue comes from it by offering analytics tools and reports to people who care enough to pay for them.

6. Forge partnerships with a product ratings site like NexTag, a travel ratings site like Yahoo! Travel, and other more lucrative verticals. It would be much easier to digg products and places than sign into each site and use its in-house ranking system. Facebook Connect could come in handy here.

7. Target China. ReadWriteWeb reports that Google OpenSocial gets most of its users from 51.com, a Chinese social networking site. What is Digg doing to tap this insanely large market?

8. Charge frequent posters.
If this article makes it to Digg, this point will undoubtedly bury it, but here goes. Wikipedia reports that

the top 100 Digg users posted 56% of Digg’s frontpage content, and that a niche group of just twenty individuals had submitted 25% of the frontpage content. A few sites have raised the problem of groupthink and the possibility that the site is being “manipulated”, so to speak.

If Digg wants to tout itself as a democracy, and Wikipedia is right, then Digg has already botched its claim. It could address this issue by instituting a pay structure, based on posting frequency, to level the playing field. Sign up for Digg with 100 credits/month, each post costs 5 credits, pay for anything additional. That kind of thing.

9. Offer a premium membership.
This premium membership, paid for monthly or annually, could guarantee users increased security, offer them more credits/posts per month, and allow them free access to cool Digg features that others can’t get to.

10. Charge a small fee for some services, like Digg Dialog
, which recently featured Al Gore. Get an editorial branch that interviews really cool people, or allows them into forums with famous people. It would be like paying $50 through Ticketmaster to see a famous person speak. Same principle; virtual venue.

What do you think? Are there any other ways Digg could stay profitable and independent? Or is it a lost cause?

Written by Drea Knufken

Currently, I create and execute content- and PR strategies for clients, including thought leadership and messaging. I also ghostwrite and produce press releases, white papers, case studies and other collateral.