Digg.com pretty much started Social Bookmarking, but they didn’t finish strong last week by selling to Betaworks for only $500 thousand dollars.
I know, a half-million is a good chunk of green, but wouldn’t you rather have $200 million? That’s what Google offered when they proposed to buy Digg.com a few years ago. But Digg’s owners declined; most likely assuming they had bigger opportunities on the horizon.
Yet, Digg.com went on to sell some of their patents to LinkedIn for $4 million; the Washington Post bought some of the Digg staff for about $12 million; and they topped it off by selling the Digg.com site, the servers, traffic and user base to Betaworks for a half a million.
Hang on. Let me get my calculator out…
$12 million + $4 million + $500 thousand = $16.5 million
$16.5 million – $200 million = (oh, ouch) -$183.5 million.
Okay, I’d take $16.5 million, but did you know that when Digg.com was started in 2004, the founder Kevin Rose raised nearly $50 million from venture capital firms to start the company? I can’t imagine the conversations I’d have with myself over giving up that kind of money, can you?
Thankfully, we have the opportunity to learn from the mistakes Digg made. They’re easy to see once you know the principles that drive the value of an internet company up or down.
Let’s look at a few of them and how Digg missed the mark…
#1: Digg.com Was First, But Not Best
Being the first at something won’t get you very far in the age of social media. Yahoo came before Google, so did MSN, so did Compuserve, AOL, Dogpile and hundreds of other search engines that are either off the map or cowering in the shadow of Google.
To add to this, Facebook is what Myspace could have been, Twitter is what Digg could have been and Youtube is pretty much what every video sharing site could have been.
Today, being first is more of a liability than an asset. Someone can see your idea, backwards engineer it, apply the principles of social marketing better than you do and become so popular so fast that no one will ever care about you or even know you exist.
Harsh I know, but that’s how things work in the age of social media. Digg started out as a very popular social bookmarking site because they were the pioneers. But the moment Twitter came, people flocked to share their content in a community that was more socially palatable.
Here’s why this happens…
#2: Your Customers Must Drive Your Content Creation
Digg made a few key decisions that eventually led to their downfall. First, they had no real value filter when it came to approving content for bookmarking. In fact, the links posted on Digg weren’t even reviewed by a human being. It was all done by a computer program that only checked to make sure the content was unique.
But more important, Digg started treating their advertisers better than they were treating their “customers” – their authors and readers. Seems like a good idea right? The advertisers are paying the bills and so they deserve to have the red carpet rolled out in front of them don’t they?
Well, consider Google’s quality standards and how hard they are on PPC advertisers, people in their AdSense network, and on SEOs. Last I checked Google was doing pretty well.
Yet, Google doesn’t bend over backwards to accommodate advertisers and will even piss off advertisers and marketers with their strict quality scores and SEO updates. Still, advertisers are spending billions to have their ads featured in the Google search results and in the Google AdSense network. Strange? Not when you consider that the value is not in selling advertisements, it’s in providing a remarkable customer experience.
So here’s a question for you:
Are You Digging Your Own Hole With Your Customer Service Practices?
This is the question of questions when it comes to learning from Digg’s near $200 million dollar mistake. You might be happy about the idea of someday selling your business for millions of dollars, but what about at a near 90% loss from what it’s worth today?
This could be the price you pay for trying to be the first, the biggest, the loudest and the flashiest or for focusing more on marketing than on creating a remarkable customer service experience. Marketing will always be important, but these days, being remarkable is King. That’s how you keep your customers talking about you and coming back over and over again.
Just ask Digg… and MySpace, and AOL, and MSN, and the thousands of other companies who have probably put most of their energy into marketing instead of customer service, but whom you’ll never hear about because their customers aren’t talking about them online.