Poor Product Design Cost Digg $144m

From $160m to $16m for the social news aggregator.

Valued at $160m in 2008 when Digg had 30m users a month, the value plummeted to $16m when its users dropped to 7m a month in 2012.

45 million in funding from A list investors like Marc Andreessen, Reid Hoffman, Greylock Partners and others. This was a 100% intangible business.

Digg had the lead, but it let others catch up.

The CEO Kevin Rose even taught Mark Zuckerberg about the Digg ‘Like’ button!

The Digg redesign (v4) was a bust and sent users packing and over to fast follower competitors like Facebook, Twitter and Reddit.

Digg’s founders were prolific designers, battling for supremacy with multiple side projects, which ultimately distracted from core product improvements and cost the business.

Digg developed and protected part of its competitive edge with IP, contracts and strategy, but ultimately its design failed to keep users from leaving to fast following competitors.

Value Realised from Digg’s IP and Intangible Assets

 As a fully intangible business these were the key assets that were sold (in distress) as the company failed:

1. Brand, code and website = $0.5m

2. Patents = $4m

3. Engineering team (15 people) = $12m

IP and Intangible Assets sold were as follows

1. In July 2012 Betaworks, a New York start up studio, bought the brand, code and website for $0.5m.

2. LinkedIn bought Digg’s patent portfolio (roughly 15 patents, 90% were applications) covering social voting and content-visualisation for $4m. These it used in its own business and later licensed to Betaworks (above) so it could relaunch Digg!

3. SocialCode (a social advertising business owned by The Washington Post) ‘acqui-hired’ the 15-person engineering team for $12m. Demonstrating the value of protecting (with contracts) and look after (with culture) the ‘human capital’ in the business

Lessons

A stark reminder that a loyal user base and solid business model are more valuable than vanity metrics.

Digg’s demise underscores the importance of designing to satisfy your community of users and protecting IP.

When Digg fell, the intangible assets were the only assets that could be sold: a brand, software, patents and the expertise of its engineers. 

That those pieces realised $16 million illustrates the importance of identifying and protecting intangible assets with IP, contracts and strategy.

Stop Press. The Phoenix rises again.

In June 2025, Kevin Rose re-purchased Digg with Reddit cofounder Alexis Ohanian and re-launched it as a rebooted version of Digg’s news aggregator with digging and burying features restored and the tagline: “The front page of the internet, now with superpowers.”