Don't count your Diggs before they hatch

This post began as a comment I was writing in response to an article on Jason Calcanis' blog entitled "Who should Digg sell to: Newscorp, Microsoft, or Google?".

It's one thing for two opposite sides of a negotiation to have reached an agreement in principle over a proposed sale -- one in which the price is off-the-table and only the final details are left to be worked out. It is a completely different situation when there are ongoing negotiations with occasional figures being tossed around, but where the two sides have not reached an agreement on price, in principle or otherwise.

I mention this because I see in Calcanis' article the potential here for a classic reminder of why you should never count your eggs before they're hatched. Admittedly I'm no industry insider, however amid all the hype that came with the recent announcement of Digg's rumored sale, there are a few details that stand out like a sore thumb.

The first and most glaring of these is the fact that the rumored price of $200 million is $100 million less than the figure that was circulating when these rumors popped up just over a year ago.

The second has to do with Digg's traffic and site usage patterns. Digg's traffic has been steadily declining for the last year and a half, as has the amount of time its users are spending on the site (source: Alexa).

Finally, the kicker in all of this is the new competitor that according to Alexa appears to be snatching up the majority of Digg's lost users and traffic while establishing themselves as the innovative leader within the social news realm, and generating ridiculous amounts of press coverage while doing so. For those new to the subject, I am referring to a six-month-old site that goes by the name of Mixx.

In just six months, Mixx has developed a thriving community on a site that is already serving a half-million unique visits each month.

Mixx has made no secret of its plans to attack and attempt to compete with Digg head-on; and the early returns on these efforts show an unprecedented success. Mixx continues to grow while Digg and Reddit are busy trying to find a way to stop the bleeding. Head-to-head gains aside, Mixx has been extremely successful in convincing people that it is for real, in a way marginalizing the other horses in the race.

As far as this pertains to Google or the others rumored to be interested in the social news giant, Mixx is a dangerous competitor that dramatically changes the dynamic of the competitive field, even before its traffic and user-base is large enough to justify the attention. Why is this? Because of Chris McGill.

McGill is not your typical college-student-turned-millionaire president of a popular web 2.0 site. In a field that is ripe with rich amateurs, McGill is unmistakably qualified to be competing at this level.

From Wikipedia: "The former head of strategy at USA TODAY, McGill previously served as the general manager of Yahoo! News where he oversaw the transformation of that site into the world’s largest online news outlet."

Make no mistake about it, Digg's prospective buyers are well-aware of this fact. They know the investment they are looking at will run well in excess of the actual sales price. Unfortunately for Digg, they have been unable demonstrate an ability to retain their existing users while putting a stop to Mixx's steady growth. This is undoubtedly one of the reasons the asking price has been slashed by 1/3, or $100 million.

To its credit, Digg did at least make an effort to retake the fort, but the algorithm changes intended to do just that blew up in its face by angering both the "power users" and the rest of the community without really motivating anyone to spend more time at Digg.

On top of all of these hurdles, Digg still has to contend with all of the many niche social media sites popping up left and right. Every day, sites like BigEasyLinks.com and HealthandWellnessArticles.com pop up in hopes of attracting a mere fraction of the communities found at sites like Digg and Mixx. For every one of these such sites that enters the marketplace, the uniqueness of the Digg concept deteriorates just a little.

From my outsider's perspective, it appears Google is expecting further price concessions. And why shouldn't they? Until Digg can show that the bleeding has stopped, their position within the market is secure, and that it is not just a matter of time until they are replaced by Mixx as top-dog; Google and the others would be wise to simply sit back and wait to see how far Digg's traffic will fall.

Waltz Rumor Part of Google's Negotiating Strategy with Digg

The social media world was recently rocked by the news/rumor that Google may be planning to punish websites and blogs that are frequently linked to by social media sites. For those not yet familiar with the situation, here are a couple of links to write-ups covering this recent development:

• Google to punish pagerank for Digg stories?
• How to avoid the next Google slap on social marketing
• Plan targeting social media link recipients is shortsighted
  

It took me awhile, but I think I've nailed down what this whole thing was really about. The key to understanding this is to bear in mind that these two companies (Google and Digg) have been actively involved in negotiations over a proposed sale of Digg to Google for somewhere in the hundreds of millions. Allow me to elaborate:

Extremely odd timing
The timing of this thing is too perfect to have been a sheer coincidence. This story has gotten a LOT of coverage over the past three weeks. That sort of thing doesn't just happen by accident when Digg and Google are involved.

Jeff Waltz never mentioned Digg by name --- but everyone else did
The first thing that stuck me as odd was the fact that nowhere in the alleged statement by the mysterious Jeff Waltz mention Digg by name, but seemingly all of the coverage by bloggers and journalists alike centered around this one particular social media site. Why could that be? I've seen no less than a dozen examples of this personally. The actual statement made by the person claiming to be Waltz was unmistakably vague and offered not a bit of suggestion that Digg or any other site was being specifically targeted.

Did the Jeff Waltz statement really appear on Google's blog?
Of course, the oddities don't end there. There is still much confusion over whether or not the statement signed Jeff Waltz ever actually appeared on the Google blog. According to bloggers' claims, the statement remained on the blog for about an hour before it was removed. If this claim is accurate, the overwhelming likelihood is that the Google had every intention of publishing the statement. Whether or not the decision to remove it was as calculated remains to be seen. How do I know this? I know this because Google is a larger and more powerful entity than most countries, and there is simply no way one of the company's primary publicly accessible communication mechanisms would be hijacked by fun-loving employees looking to spread serious rumors.

To muddy the water even further, Matt Cutts has publicly stated in the time since this story broke that he has no knowledge of any Google employee by the name of Jeff Waltz.

"Practical joke" theory not believable
That blog is Google's public relations mouthpiece. Nothing goes in to or comes out of that blog that is not extremely calculated, and any employee working for Google is going to be smart enough to know that the blog isn't a toy. If the statement in question did appear on the Google blog, it is because someone at Google wanted it to get out and reach whoever its intended audience happens to be.

This begs the question of why Google would start a rumor like this if the threats of algorithmic changes to punish social media participants didn't actually hold water to begin with? To find the answer, one must remember back until roughly a week or two before the Jeff Waltz story hit the headlines. At that time (just over a month ago), the social media sphere was abuzz with rumors that Google may be close to finalizing a deal to buy Digg.

Big-money negotiations between Google and Digg
The important thing to pay attention to here is that these two corporations are and have been in the midst of a negotiations over a potential transaction that would run into the hundreds of millions of dollars. Why is this relevant? This is relevant because in this mystery statement and more so in the subsequent media and blog coverage, Google was able to effectively communicate to Digg that it not only had all the power in the relationship, but also that Digg's asking price was still unacceptable; and that Google can and will play hardball if Digg refuses to make further price concessions.

The whole thing was a very thinly veiled threat from Google to Digg, and a reminder that a site's value can fall rapidly if suddenly it were to disappear from search.

The Devil's Take: Naivety and Spam Taste the Same

By: The Insider

With all the talk of spam circulating around the Mixx community of late, I can't help but offer a somewhat contrarian take on the matter. Make no mistake, I'm not any more fond of spam than anyone else involved in the social media scene.

That said, I think that the spam on Mixx is mild relative to comparable sites. That is not to suggest it be taken lightly, but let's not make a mountain out of molehill either. Ten minutes of time spent at any of the other sites that fall within Mixx's genre and this point is made loud-and-clear.

There has been a debate ongoing at Mixx over what actually constitutes spam, and some have even suggested that users who submit quality content (but only from their own sites) should be grouped with the no-prescription Viagra salesmen. I beg to differ with this notion.

I don't necessarily feel that there is anything wrong with people only submitting their own content - so long as it is good content (not spam). The idea that a valuable contributor to the community must adhere to a certain standard of usage behavior (in terms of submitted content ratios) is an extremely slippery slope. While it may not be a recipe for becoming a "Top Mixxer", I suspect that a lot of these users will become more active and well-rounded community members if given time. Granted, this is all contingent on the content they submit being reasonable, even if it all comes from a single source.

Additionally, while I acknowledge that this is the overwhelming exception; I was once banned from a site (I assume) because I emailed links to the post on said site to my friends who were not member of the site. These friends of mine subsequently joined the site, primarily to vote for my submissions. I am sure that the activity report from my account on that site had all the indications of a spammer who was setting up multiple accounts, even though this was not the case at all. Had the site not banned me, a few of those people that signed up as a favor to me would have become all-around contributors.

Instead, the site banned me, a decision that cost it no less than 5 potentially valuable contributors while earning it at least one dedicated enemy. I wasn't trying to game the system, just level the playing field a little bit.

My point with all of this is that I'd hate to see Mixx make some of those same mistakes, becoming overzealous to the point of throwing the baby out with the bathwater. I don't know how to effectively and efficiently distinguish between real spammers and naive users who are new to the social media scene and in need of a little bit of guidance. However, Mixx stands to gain a big leg-up on the competition if it can identify a means of separating one group from the other while educating the latter about the community norms.

I think a lot of these users that are so easily written off can be converted into valuable community members if given a little bit of time and pointed in the right direction. As a matter of fact, I know this to be the case because I used to be one of them.

There is a substantial learning curve that new users must endure in order to learn the ropes and figure out what is acceptable and what isn't. The problem a lot of sites make is discarding these users before they reach that point. While most do figure it out eventually, if cut loose too quickly they will do so at another site where they have a clean slate.

Mixx has struck a chord of passion in a lot of its users, including pretty much everyone who has taken part in the recent spam discussions. Not unlike most Mixxers, I want to do what's best for Mixx, and I have some legitimate concerns that an overzealous crackdown may be pending that could cost the site some potentially valuable community members. I think it would be in all of our best interests to consider this argument before attempting to separate the naughty from the nice.

For the record, in writing this post I am merely playing devil's advocate - however, I do believe this perspective holds a degree of truth that is worthy of consideration. What say you?

Related Links:

• Spam 2.0: new problems for an evolving web
• Dealing with spam on Mixx

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