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How to Fix Digg's Miserable Business
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How to Fix Digg's Miserable Business



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

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




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How to Fix Digg's Miserable Business Presentation Transcript

  • 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. 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. 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. 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.  Have users vote on advertisements One simple “Vote up/Vote down” buttonStep 1 of 2: Make ads relevant (cont.)Jan ‘09
  • 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. 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. 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. 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. 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. 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.  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.  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. Provided by Keith Cowinghttp://www.keithcowing.comkeith@keithcowing.comJanuary, 2009Jan ‘09