The rise and fall of Digg, and what we can learn from it

The inevitable happened yesterday, the remaining parts of Digg were acquired by Betaworks for $500,000. At the top of the peak a couple of years ago, Digg was almost acquired by Google for $200 million. We have since late April suspected that Digg would fall when their engineers left the company for work at the Washington Post. Digg was the first large social news site and has the same business model as Trejdify, so this is a good time to analyze what happened, and what we can learn from it.

The rise of Digg

Let's start from the beginning. Digg was created by Kevin Rose in 2004, and soon became one of the largest websites in the world. To analyze why this happened, we can use the book Good to Great by Jim Collins.We have earlier applied that book on Trejdify and if you want to read more about the book, please read this article: Time for Trejdify to regroup. These are the steps on how to take a company from good to great applied on Digg:

• Level 5 leadership. Was Kevin Rose a level 5 leader? He created the company from scratch, and he probably did it to make some money from it, but he also wanted to build a great product. He was the founder, and founders are often level 5 leaders.
• First who... then what. This is hard to analyze for someone on the outside, but I think Kevin Rose only hired A players in the beginning. 
• Confront the brutal facts.
• Hedgehog concept. All the early features added to Digg, such as the Diggnation show, did fit within the Hedgehog concept.
• Culture of discipline. They followed everything above during the buildup of Digg.
• Technology accelerators. They launched various features, such as the widgets to Digg a story automatically from another blog, and the Diggnation show was possible thanks to faster Internet speed.

The fall of Digg

The author of the book Good to Great has also written the book How the mighty fall. The book is about how a once great company declines toward the doomsday. Here are the five stages of decline (it may be possible for a company in decline to skip a stage) and what happened to Digg at each stage:

1. Hubris born of success. People become arrogant and they lose sight of the true underlying factors that created success in the first place.
• Digg: Digg was once one of the most popular websites on the Internet, and if you are the most popular website, you may think that you can do whatever you want. After the release of Digg 4.0 in 2010, users began to leave for other websites such as Reddit. Maybe Digg got arrogant and didn't think they needed to test version 4.0 among real users before releasing it? After the release, it was impossible to bring back Digg 3.0
2. Undisciplined pursuit of more. Companies make undisciplined leaps into areas where they cannot be great or they try to grow faster than they can hire great people. When an organization grows beyond its ability to fill its key seats with the right people, it has set itself up for a fall.
• Digg: Kevin Rose said in one of the episodes of the Random Show that because Digg grew so fast, he basically hired everyone he found, a decision he said that he later regretted
3. Denial of risk and peril. Leaders at this stage ignore negative data, and focus only on the positive data. They blame external factors for setbacks, rather than accept responsibility.
• Digg: The users complained about the new design and that various features had been removed. You could hear users say: "I used to use Digg, but the experience, especially on mobile, just kept getting worse and worse!"
4. Grasping for salvation. Companies at this stage tend to hire a leader that's supposed to save it, they try different bold strategies, creates products or acquires companies that doesn't fit within the Hedgehog concept.
• Digg: Alexis Ohanian said about Digg 4.0 that the version "is cobbling together features from more popular sites and departing from the core of digg, which was to give the power back to the people"
5. Capitulation to irrelevance or death. The setbacks starts to erode the financial strength of the company, and key persons abandons the company.
• Digg: 37 percent of the staff had to leave Digg in 2010, Kevin Rose left the company in 2011, and the engineers left the company in 2012 for work at the Washington Post 

What can we learn from it?

• A Digg engineer said that Digg 3.0 couldn't be brought back after the release of Digg 4.0. One lesson learned is to make sure to test a new version among real users before releasing it - or make sure that you can bring back the old version. 
• Never think you are smarter than your users. Just because you are the most popular guy in the block doesn't mean that you soon may become the least popular.

What's the future for Digg?

• Betaworks are about to turn Digg back into a startup, with a low budget, a small team, and fast cycles. The book How the might fall proved that it is possible to reverse a company in decline, and to do that Betaworks need to use the concepts from Good to Great. 
• I personally think that they should focus on quality news. The reason to why we created Trejdify is that the business news section on Digg is terrible. Today you can find articles in the business section like "Which Fighting Style Kicks The Most Ass?" and "Can juicing help improve your skin?" which has nothing at all to do with business. 
• The current largest competitor is Reddit, but Reddit also has a bad reputation among some people, because of various sub-reddits that are rather "extreme." Digg can probably find users among those who prefer a less extreme website.
• Many traditional newspapers are struggling for their survival, and the investor Warren Buffett believes that newspapers should only act locally - not globally (The future of traditional newspapers according to different experts). Can Digg become the online newspaper who act globally aggregating content from all the local newspapers?    

Source: TechCrunch, TechCrunch, Wikipedia, Betaworks