The Big Digg Lesson: A Social Network Is Worth Precisely as Much as Its Community

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A social networking company is not a technology company like Intel is a technology company; its users are its product.

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Digg has been sold for the astonishingly low price of $500,000 to Betaworks, the Wall Street Journal reports. There are sad things about this and there are funny things about this. This sale, along with Facebook's IPO and Reddit's spinout, marks the end of the first era of social media.

It is easy to forget how high-flying Digg once was. Digg was supposed to be the future of all media, not just social media. People were going to rule the Internet; people were going to curate the web. Down with gatekeepers! But, as many Digg users quickly discovered, new gangs of gatekeepers kept a tight grip on the site's story flow. These guys played the Digg system, often with a mix of social and monetary motives, and Digg never figured out how to incorporate their power users into their community without giving them all the power.

Here was the huge problem with the Digg system. People submitted stories that were nominally voted up or down. But those stories didn't get more traffic linearly as the upvotes flew. No, you only got a bunch of traffic if the algorithm selected the story and sent it to the front page.  This meant that trying to "pop" stories on Digg was like playing NBA Jam with hotspots turned on. The same amount of effort sometimes yielded 12 points and sometimes 2 points and most often 0 points.

The only way to consistently get stuff on the home page was to work at it like a job. And so, some people began to work at it like a job, and then it became their jobs. While some really thought of themselves as an important part of the journalistic enterprise, many others contracted out their services to entities of all kinds. Stripped of any institutional sense of editorial ethics, many Digg power users ended up promoting all kinds of crap along with good stories from legitimate writers and sites.

Meanwhile, everyday users were realizing that nothing they submitted ever even had a chance in hell of going to the front page. They weren't empowered netizens visiting from the future, but chumps who were being played by Digg and a bunch of "social-media consultants."

In short, the community broke. And the community, remember, is also the content machine. Without that, Digg was revealed to be just a bunch of computers waiting for people to add value to the thin offering of a social network. The site still gets a substantial amount of traffic, but that Myspace/Friendster smell of death hangs in the pixels.

There is one clear lesson from Digg's sale: the technology that powered a once-massive social network is worth about $500,000. All the rest of the value derives from the people that use it. Though scaling is tough, any developer in the world can build some profiles and let people connect up. It's an act of genius -- or an act of God, by which I mean luck --  to design a site constitution that makes people want to build their online lives at your URL (or in your app). Social networking companies are not technology companies as much as they are community companies.

To be honest, I don't know why anyone tries to start these things. No one has much of a competitive advantage, the space is crowded, you can't compete on price, and no one wants to join a Reddit for hermit crabs. Then I remember how social networks function: users produce the product and they *are* the product. Now that's some kind of good hustle. 


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Alexis C. Madrigal

Alexis Madrigal is the deputy editor of TheAtlantic.com. He's the author of Powering the Dream: The History and Promise of Green Technology. More

The New York Observer has called Madrigal "for all intents and purposes, the perfect modern reporter." He co-founded Longshot magazine, a high-speed media experiment that garnered attention from The New York Times, The Wall Street Journal, and the BBC. While at Wired.com, he built Wired Science into one of the most popular blogs in the world. The site was nominated for best magazine blog by the MPA and best science Web site in the 2009 Webby Awards. He also co-founded Haiti ReWired, a groundbreaking community dedicated to the discussion of technology, infrastructure, and the future of Haiti.

He's spoken at Stanford, CalTech, Berkeley, SXSW, E3, and the National Renewable Energy Laboratory, and his writing was anthologized in Best Technology Writing 2010 (Yale University Press).

Madrigal is a visiting scholar at the University of California at Berkeley's Office for the History of Science and Technology. Born in Mexico City, he grew up in the exurbs north of Portland, Oregon, and now lives in Oakland.

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