Wednesday, December 19, 2007

Is Digg really worth $300m?

There's a rumor going around that Digg is trying to sell itself to somebody (anybody?) for $300m. That seems like a lot of money to me so I went searching for comparative statistics. Prior to taking their series B financing, Digg was rumoured to be looking for (and failing to find) a buyer at $150m.

Back in 2005 News Corp. bought Intermix for $580m. Intermix spent $69m of that money to acquire the remaining 47% of MySpace that it didn't already own. The company had 27 million unique users per month at the time of acquisition. So they paid roughly $22 per user.

Now take a look at Digg today with about 17.8m unique visitors. Using that same metric Digg would be valued at $392m.

But now look at the attention span of those people on the site.

Visitors to look at an an average of 37 pages per visit whereas Digg users look at 5. In terms of time Digg users spend 0.04% of their time on Digg, whereas MySpace engages users for 7.3% of their time. So > 7 times the pages viewed, plus 180x more time spent on MySpace than Digg.

Now, the average stay at Digg is 2m25s and MySpace is 24m26s. So people spend 12 times longer on MySpace than on Digg.

So MySpace is way more engaging that Digg, which isn't surprising given that Digg is place you go to go someplace else. You're unlikely to spend long there.

So how do you discount the $392m based on engagement..? By % of time spent there Digg is worth $2m, by length of stay it's $32m, by pages viewed it's $56m.

Now, Digg has taken about $11m in VC money so assuming participating preferred etc. the VCs aren't going to be happy below that $32m number.

My guess is that Digg is worth somewhere between $50m and $100m. Of course, I don't know what their revenues are and if they are making a lot on advertising then those numbers could change. The rumour has always been that Digg users don't click on ads so their revenue might not be spectacular.

Another telling statistic on Digg is its Alexa rank which dropping fast.

And if they are out there looking to be sold the price will be depressed.

$300m: too high IMHO.

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