Social news aggregator Digg was one of the hottest Internet brands a few short years ago. Now, post-decline, it’s been sold to Betaworks for a reportedly paltry sum – $500,000, reports CNN.
Its last round of funding, in 2008, valued the company at $164 million.
According to Forbes, that means that Digg managed to lose more than 99% of its value in four years for its investors, a group that included Marc Andreesen, Reid Hoffman, Highland Capital Partners and Silicon Valley Bank.
Meanwhile, Tech Crunch reported that Digg CEO Matt Williams confirmed that “the overall consideration is significantly larger” and includes a combination of cash and equity.
Another source close to the negotiations said that the price was indeed not $500k.
Betaworks is acquiring a website that still has a well known brand and sizable audience of more than 7 million visitors per month as of May, according to The Wall Street Journal.
Matt Williams, Digg’s chief executive, will become an entrepreneur in residence at the venture capital firm Andreessen Horowitz when the deal closes.
Mr. Williams said Digg had spent a significant amount of time looking for the right buyer, zeroing in on technology incubators that were interested in news-related start-ups, reports The New York Times.
“Betaworks seemed like a great fit,” Mr. Williams said. “They want to reinvent Digg, and that’s exactly what they will do.”
Digg was once one of the most promising start-ups in Silicon Valley. The website was founded in 2004.
Digg lets users submit links and either “upvote” or “downvote” other submissions. The site quickly amassed a strong following and grew so popular that some sites crashed from the traffic firehose.
The site quickly rose to prominence, mostly due to telegenic founder Kevin Rose, a former cable television talk show host. In 2006, Mr. Rose landed on the cover of BusinessWeek with the now infamous cover line, “How This Kid Made $60 Million in 18 Months,” referring to the company’s valuation at the time.
However, since the release of Digg v4, dubbed “the new Digg” in the summer of 2010, the once-hot company has met with a series of challenges. Poor reception led to plummeting traffic, changes in management and layoffs.
Newer social-news website Reddit Inc. stole some of Digg’s thunder.
In March of last year, Mr. Rose, the founder, resigned from the company. He is now a venture capitalist with Google Ventures.
Rose said he had always been a fan of Mr. Borthwick and the companies he had nurtured at Betaworks.
“John understands the real-time nature of the Web and how to capture and surface trends as they occur,” said Mr. Rose, in a blog post on Digg’s Web site. “Given his experience with Bit.ly, News.me and Chartbeat, I can’t wait to see what he does with Digg.”
Betaworks intends to fold Digg into News.me Inc., a digital media start-up that Betaworks launched in April 2011.
None of Digg’s remaining employees will join Betaworks as part of the acquisition. Chief Executive Matt Williams will join venture capital firm Andreessen Horowitz as an entrepreneur-in-residence.