Betaworks buys social news site Digg, or what's left of it

Digg, one of the first social media sites, was bought on Thursday by development firm Betaworks for $500,000 – a fraction of its value in the late 2000s. Betaworks has a plan to "take Digg back to its startup roots."

In its heyday, social news site Digg raised $45 million from Silicon Valley investors. On Thursday, it was bought by New York development firm Betaworks for $500,000. What happened?

The short answer is that Digg's fortunes have been waning for more than two years. The company got in on social media early – it was one of the first "social news" sites, allowing users to submit stories and links from around the Internet and letting other users vote these links up to prominence or down into obscurity. In 2008, the site had 30 million monthly visitors, but its fortunes began to fall in 2010 as other social media companies such as Facebook and Twitter rose. It also faced competition from Reddit, a similar social news site that began drawing more monthly visitors last December. Digg currently has about 7 million visitors a month.

The deal highlights how far Digg has fallen: in 2008 the company was reportedly working on a deal to sell itself to Google for $200 million, although it never went through. And the announcement of the Betaworks acquisition had just 162 "Diggs" nine hours after it was posted -- a few years ago, such a story probably would have gotten thousands by this point.

But for its half-million investment, Betaworks is still getting a well-known brand and a not-insignificant monthly audience. Betaworks plans to work Digg into its News.me service, which creates personalized daily e-mail newsletters by collecting news articles that are being shared by a user's Facebook and Twitter contacts. The company says it wants to make Digg "back into a startup," with an emphasis on "low budget, small team, fast [update] cycles." And Matt Williams, Digg's Chief Executive, promised that Betaworks would soon unveil "a new cloud-based version" of the service.

The deal doesn't include any of Digg's employees -- the entire site will be managed by the 10-person News.me team and John Borthwick, the founder of Betaworks, will become Digg's new CEO. There are fewer than 15 Digg employees remaining, anyway: the bulk of the engineering team was hired in May by Social Code, a subsidiary of the Washington Post. Joseph Walker and Spencer E. Ante at the Wall Street Journal report that Matt Williams has been hired by Andreessen Horowitz, a venture capital firm, as the entrepreneur-in-residence.

Are you, or were you, a Digg user? Do you think Betaworks can return the company to prominence? Share your thoughts in the comments section below.

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