How to Fix Digg's Miserable Business

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Winning submission to Silicon Alley Insider's Fix Digg's Miserable Business Contest (Jan., 2009)

http://www.businessinsider.com/2009/1/our-email-to-digg-founder-kevin-rose

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How to Fix Digg's Miserable Business

  1. 1. How to Fix Digg’s Miserable BusinessKeith Cowing (keithcowing.com)[Winning submission to Business Insider’sFix Digg’s Miserable Business competition, Jan ‘09]
  2. 2. Digg’s Current Situation Digg provides value in 2 key ways Uses crowd sourcing (user votes) to control everything Drives major traffic to third party websites Does not take advantage of either! Serves ads like a publisher even though it doesnot provide original content Needs a fundamentally different advertising modelJan ‘09
  3. 3. A New Perspective Need to act more like Google and less like Yahoo! Digg is a portal that provides a form of “search” Users come to Digg searching for articles that otherpeople liked Generic ads on portal sites do not work well(See Yahoo!’s annual report) Extremely relevant ads on searches work great(See Google’s annual report) Digg must revamp advertising model to act like asearch engine (it is not a content provider!)Jan ‘09
  4. 4. Step 1 of 2: Make ads relevantCurrent Digg HomepageOnly one ad above the fold and many users don’tneed to drop 43 lbs.Jan ‘09
  5. 5.  Have users vote on advertisements One simple “Vote up/Vote down” buttonStep 1 of 2: Make ads relevant (cont.)Jan ‘09
  6. 6. Voting on advertisements: why this will work Digg users vote on everything and love it No need to exit the page Digg can increase the influence of a user’s vote eachtime he or she rates an ad (provides an incentive) “Power Users” invest a lot of time building their networkand influence – will definitely vote on ads to maintaintheir weight in the community Users will see ads that are much more relevant (basedon votes from the user, from other users with similartastes, and from the entire community) Digg can charge advertisers for data about thedemographics of users who like and dislike their adsStep 1 of 2: Make ads relevant (cont.)Jan ‘09
  7. 7. Current Situation Digg drives large amounts of traffic to otherwebsites and does not make any money from it Users visit Digg looking for articles that otherusers enjoyed reading After finding a destination, the user leaves Diggand goes to the third party site – Digg receivesnothing Advertisements are so removed from what theuser is looking for, they are not “alternatedestinations” that the user would happily visitStep 2 of 2: Monetize traffic outflowJan ‘09
  8. 8. How Google Does it: One example: Google serves 5 search results and9 paid “alternate destinations” above the fold “Alternate Destinations” are very similar to thelinks from Google’s algorithmStep 2 of 2: Monetize traffic outflow (cont.)5 Standard Links9 Sponsored LinksJan ‘09
  9. 9. How Digg Can Do it: Reorganize tabs (technology/sports/etc.) by topic List standard results along with “Sponsored Links”Topics Standard Results Sponsored Links Old Ad Scheme(not context-relevant)Step 2 of 2: Monetize traffic outflow (cont.)Jan ‘09
  10. 10. Sponsored Links: Why it will work Provide links that are very similar to what the user issearching for – viable “alternate destinations” With Vote Up/Vote Down buttons, unwanted ads willnaturally be filtered out – sticking with Digg’s corevalue (user votes control everything) Many companies write articles or press releases andpay for traffic (new product promotions, etc.) If a Sponsored Link becomes popular, Digg can makemoney from driving traffic to a third party site The layout has been proven successful by sites likeGoogle News and TechmemeStep 2 of 2: Monetize traffic outflow (cont.)Jan ‘09
  11. 11. Short-term Growth: Assumptions 58 million page views per month (comScore) 60% of page views result in a click on an article With new layout, 20% of clicks on articles will be“Sponsored Links” Average CPC on a “Sponsored Link” is $0.50 Current ad scheme yields the same CPM (more adsare being displayed, but they are better targeted) 2008 revenues of $8.5M (assuming that Q408revenue was $2.1M)Jan ‘09
  12. 12.  Basic ad scheme: $8.5M/year (flat) Sponsored Links: $41.8M/year (all upside) This is an instant revenue increase assuming noincrease in traffic Will make Digg profitableShort-term GrowthJan ‘09
  13. 13.  Significant growth potential for market researchaspect (instant feedback to advertisers about whatusers like/dislike, with demographic info) Significant growth potential as a PR outlet forcompanies who are willing to pay for traffic via“Sponsored Links,” especially as Digg grows Facebook Connect integration could boost userbase by removing the extra user name/passwordand by leveraging the Facebook news feed forviral growthLong-term GrowthJan ‘09
  14. 14. Provided by Keith Cowinghttp://www.keithcowing.comkeith@keithcowing.comJanuary, 2009Jan ‘09

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