Digg raised $40mm in VC. VCs don't give you money to put in the bank... they give you money to hire people and invest in things that might be profitable in the future.
Yes, Digg could probably have bootstrapped. But they didn't, they raised money, and once they did that, the money that the VCs gave them was meant to invest, which is guaranteed to mean that the company shows a loss.
If there was something useful for Digg to be spending that money on it's one thing, but using more people to do the same thing causes failure. IMO the goal should be to be profitable based on your income stream. With new capital you can setup some R&D or spend that money on new projects outside of your core company or advertising etc, but you need to avoid supporting the core of your company with new capital. That way you can cleanly dump everyone that's not part of making money and not kill the company.
PS: Every dollar you spend that's not supported by revenue should get the company more than one dollar in profit.
Digg raised $40mm in VC. VCs don't give you money to put in the bank... they give you money to hire people and invest in things that might be profitable in the future.
Which begs the question: why exactly did they need 40mm in funding?
seriously, Digg just spends too much money. I guess that's fine and all for expansion when the VC money is coming in, but they spent $10.4 million in the first three quarters of 2008? Doesn't that figure seem insane for a company like digg?
On those numbers Digg has revenues of approx 3 US cents per unique visitor. Not too bad, surely? How much could they charge for advertising?
It costs Digg about 5 cents per visitor. Where is that going? Seems excessive for bandwith + servers. The content is user generated, I cannot believe that they are spending much of that $14m on development or administration.
It REALLY depends on page views. Unique visitors has nothing to do with revenue. 3 cents per visitor is very low if they have high pageviews per, which I'm guessing they do.
Yes, I was thinking unique visits, rather than visitors - my mistake. They probably have a lot of people who visit daily, so the number of visits is easily hundreds of millions, page views could be billions.
they have too many employees, my guess its an inferiority complex....big site? means you need to have big company to back it up...meanwhile 1 person sites like plentyoffish are raking it in w/o huge costs
The same reason why I don't believe Facebook will ever reach real profitability - their primary audience is a bunch of poor, broke college students, not to mention ones who are generally anti-corporate.
The advice in the article seems good..
digg.com/movies ads related to movies/blockbusters
digg.com/music music ads
....
ads targeted according to categories...
If you're going to editorialize in the link title, at least spell properly. Or did you mean they're just taking the money to the park and setting it free?
Yes, Digg could probably have bootstrapped. But they didn't, they raised money, and once they did that, the money that the VCs gave them was meant to invest, which is guaranteed to mean that the company shows a loss.