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In August 2006, less than two years after its launch, the social content aggregation site Digg was an Internet darling. That month, founder Kevin Rose grinned from the cover of BusinessWeek, sporting a backwards baseball cap and headphones and giving two thumbs up with the headline, “How This Kid Made $60 Million in 18 Months”—a nod to what the site was then thought to be worth. Digg, which let users post content that could then be voted up or down by others, was flying high.

Last week, after more than 350 million up-votes, or “Diggs,” the site announced it was acquired by technology investment and development company Betaworks. The price, according to a Wall Street Journal report, was $500,000—a fraction of the over $160 million the site was thought to be worth at one point in 2008 and of the $45 million investors have poured into the company over the years.

A lot has changed since that BusinessWeek cover story, most notably the emergence of Facebook and Twitter, where users can easily post links their friends can simply click, comment on, and repost themselves. Digg’s traffic, which according to comScore data climbed to 29.1 million unique monthly visitors in January 2010, has since dropped steadily.

Yet while Digg floundered, a very similar—and initially much tinier—website blossomed: Reddit, which launched in mid-2005, also with the goal of democratizing online news and content. According to comScore information stretching back to late 2009, Digg’s traffic has generally declined since its 2010 peak, falling to 7.3 million in May of this year. Reddit, meanwhile, has faltered at times but climbed overall: the site had just 1.7 million unique visitors in January 2010, but ended May with 9.2 million. With these two trends in motion, comScore’s count shows Reddit surpassing its rival this past December and staying ahead since then.

So why has Digg fallen while Reddit has risen? According to analysts and insiders, it was a combination of factors, including changes to Digg’s user experience and its failure to mature in a way that could capture mainstream users.

The plummeting visitor counts tell only part of the story: As Gartner analyst Michael Gartenberg notes, Digg still has traffic that many sites would envy. But while Reddit—which has been owned by publishing company Conde Nast since late 2006—retained early adopters while expanding the appeal of its services to a more mainstream audience, Digg struggled. Reddit built up user trust, cofounder Steve Huffman says, by remaining consistent. Digg failed to stay true to its original tone.

Altimeter Group industry analyst Jeremiah Owyang and others cite changes over the past several years to the site’s design, which he believes made it harder to find and share information. In particular, a redesign in August 2010 angered users by changing popular features and rolling out with bugs. Over time, “it just became more complex of a layout,” Owyang says, which caused people to leave.

Marcus Messner, an assistant professor of mass communications at Virginia Commonwealth University who studies social networks, says there were other changes that upset users, like not letting them communicate directly with each other. Some of those who were weary of Digg went to Reddit, and more and more people started sharing links on Facebook and Twitter, too.

“Consumers are fickle,” Owyang says. “They’ll go wherever they can get info the fastest and the best quality information.”

Reddit cofounder Steve Huffman believes users were never that loyal to Digg in particular, though. “What we always used to say to make ourselves feel better when we were smaller than Digg was, ‘Every Reddit user knows about Digg but uses Reddit instead. But not every Digg user knows about Reddit,’ ” says Huffman, who left Reddit in 2009 and went on to cofound the travel site Hipmunk.

Huffman and others don’t think Reddit killed Digg, but he acknowledges that Reddit didn’t help. “[Former Digg users] just happened to go to Reddit, which made my day, but I think they were leaving Digg, period,” he says.

As for Digg’s future, there’s skepticism about whether its new owner will revive the site in some way. Betaworks said in a blog post that it plans on “turning Digg back into a startup” via its own mobile-focused social news site, News.me, which will “take Digg back to its essence: the best place to find, read, and share the stories the Internet is talking about. Right now.” Neither Betaworks nor Digg responded to requests for comment.

Gartenberg and Messner, at least, don’t think this will happen.

“How do you bring back something?” Gartenberg asks. “At this point, the mass-market consumer doesn’t understand it and the digerati have clearly moved on.”

Of course, Reddit could eventually find itself in a situation similar to Digg’s as sites like Facebook and Twitter become ever more popular for sharing news. Some industry watchers feel confident it will continue to grow, though. Owyang says one reason  is that techies still want a place where they can share content and chat in an anonymous setting, which Facebook doesn’t allow. Also, the site lets users dictate their own experiences—anyone, for example, can start their own “subreddit” on any topic (although existing ones cover everything from cute animals to user-to-user snack exchanges).

It’s not “super mainstream consumer yet,” Gartenberg says, but the site continues to evolve and gain more users.

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Tagged: Communications, Web, Digg, Reddit, Betaworks

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