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

1. How to Fix Digg’s Miserable Business
Keith Cowing (keithcowing.com)
[Winning submission to Business Insider’s
Fix 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 does
not provide original content
 Needs a fundamentally different advertising model
Jan ‘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 other
people 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 a
search engine (it is not a content provider!)
Jan ‘09

4. Step 1 of 2: Make ads relevant
Current Digg Homepage
Only one ad above the fold and many users don’t
need to drop 43 lbs.
Jan ‘09

5.  Have users vote on advertisements
 One simple “Vote up/Vote down” button
Step 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 each
time he or she rates an ad (provides an incentive)
 “Power Users” invest a lot of time building their network
and influence – will definitely vote on ads to maintain
their weight in the community
 Users will see ads that are much more relevant (based
on votes from the user, from other users with similar
tastes, and from the entire community)
 Digg can charge advertisers for data about the
demographics of users who like and dislike their ads
Step 1 of 2: Make ads relevant (cont.)
Jan ‘09

7. Current Situation
 Digg drives large amounts of traffic to other
websites and does not make any money from it
 Users visit Digg looking for articles that other
users enjoyed reading
 After finding a destination, the user leaves Digg
and goes to the third party site – Digg receives
nothing
 Advertisements are so removed from what the
user is looking for, they are not “alternate
destinations” that the user would happily visit
Step 2 of 2: Monetize traffic outflow
Jan ‘09

8. How Google Does it:
 One example: Google serves 5 search results and
9 paid “alternate destinations” above the fold
 “Alternate Destinations” are very similar to the
links from Google’s algorithm
Step 2 of 2: Monetize traffic outflow (cont.)
5 Standard Links
9 Sponsored Links
Jan ‘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 is
searching for – viable “alternate destinations”
 With Vote Up/Vote Down buttons, unwanted ads will
naturally be filtered out – sticking with Digg’s core
value (user votes control everything)
 Many companies write articles or press releases and
pay for traffic (new product promotions, etc.)
 If a Sponsored Link becomes popular, Digg can make
money from driving traffic to a third party site
 The layout has been proven successful by sites like
Google News and Techmeme
Step 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 ads
are being displayed, but they are better targeted)
 2008 revenues of $8.5M (assuming that Q408
revenue 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 no
increase in traffic
 Will make Digg profitable
Short-term Growth
Jan ‘09

13.  Significant growth potential for market research
aspect (instant feedback to advertisers about what
users like/dislike, with demographic info)
 Significant growth potential as a PR outlet for
companies who are willing to pay for traffic via
“Sponsored Links,” especially as Digg grows
 Facebook Connect integration could boost user
base by removing the extra user name/password
and by leveraging the Facebook news feed for
viral growth
Long-term Growth
Jan ‘09

14. Provided by Keith Cowing
http://www.keithcowing.com
keith@keithcowing.com
January, 2009
Jan ‘09