The story of Digg.com
There once was this boy named Kevin. He was a TV host in San Francisco who spent a lot of time with the high-flying technology crowd back in the internet bubble days. When the party came to an end, the craziness was over, but the underlying innovation never really left. Kevin looked around and noticed a couple of things. First off, while at the height of the dot-com boom, millions of venture capital dollars were needed to get a site online. With revenues being very small in the old dial-up world, the dot-com companies were burning way too much cash to ever be profitable. Today, the cost of starting a major online venture has gone through the floor. In Kevin’s case, it cost him $1000 for a programmer to sketch out the site and one of those $99-a-month dedicated web servers. The second thing was that if you harness the power of the simple, personal recommendation and multiply that; you end up with an information filter much more powerful than any computer algorithm. It’s the ‘Wisdom of Crowds‘ being put into practice. Users submit information, if people like that information, they recommend it by “Digging it”, the more Diggs, the more prominent it becomes. The collective wisdom of millions of users then becomes the editor. Kevin decided instead of reporting the tech news on Tech TV, I’m going to join the ranks of the entrepreneurs.
The site, Digg.com, went live in December of 2004. I became a registered user 1 year ago this month when it was still pretty much a geek hangout. Today it is the 24th largest site on the web serving 1 million users daily, and growing exponentially. The New York Times, one of the largest and most trusted brands in news is number 19, and about to be eclipsed by something started with a burn rate of $99 a month.
The great thing that this article from Business Week magazine points out, is that now there is lots of venture capital financing available, but the new players in the Web 2.0 space aren’t burning money fast enough to sell off large chunks of the company just to raise the money. They can now afford to refine their product without the pressure of the cash burn. At revenues of $3 million per year, which is just scratching the surface of what could be done with a daily audience of 1 million, Digg can innovate on their own schedule in a very sustainable fashion.
The barriers of entry into previously unreachable market segments are dropping fast. If the New York Times or Reuters could be replaced by a great idea and $99 a month, there is something exciting going on here.
Take the time to read the article, the story is one that should be taken to heart by old media people everywhere.
