Beleaguered Digg announces more layoffs

After its launch of the "Version 4" redesign proved disastrous, Digg has laid off about 37 percent of its staffers and promises to refocus on product and profitability.

Long gone are the days when then-Digg execs Kevin Rose and Jay Adelson would make joint appearances at tech industry conferences and giddily discuss a cluster of new features coming to the social-news site--as well as the fact that they were, invariably, looking to hire new employees.

On Monday, following a report in AllThingsD that publisher and Chief Revenue Officer Chas Edwards was bailing for a start-up, Pixazza, CEO Matt Williams e-mailed staffers to announce that "the burn rate is too high" at the company and that it would be laying off 25 of its 67 staffers, a total of 37 percent. At its peak--at the time of Adelson's departure--the number of employees was slightly over 100.

"We must significantly cut our expenses to achieve profitability in 2011," Williams wrote in the e-mail. "We've considered all of the possible options for reduction, from salaries to fixed costs."

Williams, a former Amazon executive, joined Digg as chief executive fewer than two months ago , following a major executive shake-up in which CEO Jay Adelson departed and was replaced temporarily by Rose . In the meantime, other prominent Digg employees started trickling out the door, a few heading to AOL and some to start-ups like SimpleGeo (co-founded by former employee Joe Stump) and Path. A month later, Digg laid off about 10 percent of its staff .

A product refocus is also imminent. At the time of the executive shake-up, Digg had also just rolled out "Version 4," a long-anticipated redesign that attempted to bring the service from fanboy favorite to potential mainstream hit. Suffice it to say that it hasn't been a smooth transition; to add insult to injury, rival Reddit, which sold to Wired Digital a few years ago, has experienced a renaissance of influence as its tech- and politics-savvy user base has moseyed its way into issues as varied as the medical marijuana legislation debate and hatching the initial idea for comedians Jon Stewart and Stephen Colbert to host mock political protests in Washington, D.C., before Election Day. (They're holding their joint rallies on Saturday.)

Of course, in the tech industry, it ain't over till it's over--just look at Apple, and rival PC-maker Michael Dell's now-infamous comment in 1997 that newly reinstated CEO Steve Jobs should "shut it down and give the money back to the shareholders." But it increasingly appears as though Digg won't follow that path, and that it's become a latter-day cautionary tale about too much faith in media hype.

In mid-2006, a BusinessWeek cover story featuring a grinning Kevin Rose pointed out that Digg was the 24th-most-trafficked Web site in the U.S., ahead of Fox News and approaching The New York Times. AOL and Yahoo were scrambling to copy its social-news model, the breathless article recounted. Over the next year and a half, the rumors began to show up. Al Gore's Current Media had wanted Digg and was willing to pay $100 million ; Rose turned the offer down. News Corp. was a reported suitor as well . A deal with Google was reportedly <i>almost</i> completed before talks fell apart .

But the BusinessWeek article from 2006 concluded, almost prophetically: "Wannabes be warned: As nearly everyone found out six years ago (in the dot-com bust), the fall from rock star to pariah can be just as quick--and not nearly as much fun."

Rose is now an active angel investor, and industry recognition of Digg employee talent is evident in the number of companies that have been eager to scoop them up. So they're hardly pariahs--but at this point few can deny that the company was badly mismanaged over the years, and that one attempt after another has been unable to get it back on its feet.

This post was expanded at 12:36 p.m. PT.

 

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