Digg has always been a media darling. With its ever so cute Kevin Rose and his rags to riches story of runaway success, everyone in tech knows Digg. So do its tens of millions of monthly visitors.
Once upon a time massive traffic swells were called the Slashdot Effect, of course that was until Digg blew past Slashdot and claimed it as the Digg effect.
So. Much. Tech.
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Digg, in its six-year history, has grown from the fringes of the internet to the very center, with its front page links sending tens of thousands of people this way and that.
But through the long Cinderella tale of the website and its photographable founder, profits were scarce. Not to be found, to be exact. The company lost money, leaning on its total $40 million dollars in investments that the company had raised over three rounds.
It mattered little, the company had cash in the bank, a steady (if too small) revenue stream, and a vast user base. No one expecting Digg to start turning a profit, possibly ever. In recent years buyout rumors have circled, and circled, and re-circled the company. At least in the press.
Most recently the blogosphere lost their lunch over a possible $200 million buyout from Google. Oh, I failed to mention something. Digg has access to a young, generally educated and more wealthy than average audience. Advertisers want to reach those people acutely, so Digg is quite valuable, if previously not profitable.
Fast forward to just five months ago, with the introduction of Digg Ads, a blend of traditional advertising and the Digg ethos. You know what they look like, go to Digg and look at the first few stories. More likely than not there will be one that looks similar, but not completely the same. That is an add.
In classic Digg style, you can vote it up or bury it down.
Reaction? Money maker, in a big way. By listening to their community and building ads that they would react well to, Digg has grown Digg ads since its birth to some 30% of their revenue. And the best part, according to the company they were EBITDA profitable in 2009.
Of course (assuming you are not overly familiar with the annals corporate finance), this means that Digg still probably lost money in the year due to capital outlays. However, aside from buying new servers, the company is profitable.
We always used to joke that if the biggest Web 2.0 still lost money, the whole genre was a wash. I guess not. Well done Digg, congratulations.