Digg: A Cautionary Tale for Web 2.0 Companies - Research Paper Example

Digg: A Cautionary Tale for Web 2.0 Companies A Cautionary Tale for Web2.0 companies Article Reference: URL = http://www.newsweek.com/2010/10/24/digg-a-cautionary-tale-for-web-2-0-companies.html Article Date: October 24, 2010 The article discussed how the web 2.0 company Digg plunged from an estimated value of $200 million (four years ago ) to $30 million. It seems that the people who gave an estimate of Diggs’ real worth made a miscalculation since the site is as ephemeral as other Web 2.0 sites. The creator of Diggs, Kevin Rose, did not really earn the $60 million after all and Digg is continually losing business. The essence of the above referenced articles is as follows: Last year, the site has attracted 18 million unique visitors in the United States alone according to ComScore. Now, visitors are reduced to 5.5 million. Digg made a blunder by changing the site’s design and features which caused dissatisfaction among its followers. Digg’s biggest competitor is Twitter and many potential threats happen on the online world Connection to Real World Situations Millions of people online actively search for newer web 2.0 technologies that could satisfy their needs. A great majority of people going online prefer to browse social networks like Facebook which offers many features such as chat, games, blog notes and fan page. It is critically important for sites like Digg to be updated to keep up with competitors. Additionally, people who browse online have changing tastes that are hard to satisfy. What is the impact to MIS or IT? The main impact on IT is that more complicated web 2.0 technologies would come out in the future. This could also mean significant changes in web architecture as well since newer sites have to be more competitive. What is the impact to business over all? On the part of the customers, they would have more choices since competition would be tough among web 2.0 technologies. On the business side, more advertisers would earn money since the avenue for promoting products are countless. More people would have jobs since additional writers, web masters and web developers would be needed. Everyone would benefit when the industry is robust. What is the Christian perspective? "From the least to the greatest, all are greedy for gain; prophets and priests alike, all practice deceit” ( Jeremiah 6:13, NIV). Apparently, a great number of online business owners want to have a piece of the action and profit in a short period of time. While it may be true that sites like Facebook make tons of money, not all are that lucky. In fact, a very large number of online business fail too .People do not want gradual growth but desire explosive success motivated by greed. Do I agree with position of the author? The position of the author is really valid since he gave an insightful comment on the nature of sites like Digg. He was right when he stated that such web 2.0 technologies do not have customers as compared to real life business. People just visit the site and its profitability depends on the whims and caprices of the online public. Online world is very competitive and even Facebook is threatened by competitors that haven’t existed yet. Sources: Lyons, D. (2010, October 24). Digg: A Cautionary Tale for Web 2.0 Companies - Newsweek. Newsweek - National News, World News, Business, Health, Technology, Entertainment, and more - Newsweek. Retrieved November 6, 2010, from http://www.newsweek.com/2010/10/24/digg-a-cautionary-tale-for-web-2-0-companies.html The article : Digg This A cautionary tale for Web 2.0 companies. Four years ago Kevin Rose, the boyish, 20-something founder of Digg, was on the cover of BusinessWeek under a headline that screamed HOW THIS KID MADE $60 MILLION IN 18 MONTHS. Digg wasn’t rocket science. It was just a Web site where people could vote for news stories they liked so that popular stories rose to the top. And Rose hadn’t actually made $60 million. That was just what his shares in Digg would be worth based on pie-in-the-sky estimates of the company’s value. “People in the know say Digg is easily worth $200 million,”BusinessWeek wrote. The problem with those “people in the know” is that Silicon Valley is filled with them, and most of them don’t know all that much. Digg struggled for a few years, then swooned, and now finds itself in free fall. One year ago the site attracted 18 million unique visitors in the United States. By last month that number had plunged to 5.3 million, according to ComScore. (Digg says the figures are higher than what ComScore reports but concedes traffic has dropped.) Rose never got his $60 million, and chances are he won’t. Digg will generate about $15 million in revenue this year and still operates at a loss, estimates Michael Arrington, editor of TechCrunch, a blog that tracks Silicon Valley startups. Digg’s backers would likely be willing to sell the company now for as little “as $20 million to $30 million,” Arrington says. That’s a bummer, since investors have pumped $40 million into this outfit since it was founded in 2004, and Rose and his backers are rumored to have had chances to sell the company for $130 million. Digg’s collapse has become a cautionary tale for so-called Web 2.0 companies in Silicon Valley, even the current crop of superstars, like Facebook and Twitter. The basic problem is that these new-media companies don’t really have customers; they have audiences. Starting a company like Digg is less like building a traditional tech company (think Apple or HP) and more like launching a TV show. And perhaps, like TV shows, these companies are ephemeral in nature. People flock in for a while, then get bored and move on. Maybe there’s nothing wrong with that, especially since these companies aren’t that expensive to launch, and some of them make a lot of money before they fizzle out. MySpace, the social-networking site, has seen its traffic decline 36 percent over the past three years but still generates close to $400 million a year in revenue, according to eMarketer, a Web researcher. Digg’s wounds are at least partially self-inflicted. In August, Digg introduced a new design that users hated. Reaction was so bad that for a time some of the most popular stories on Digg were about how awful Digg had become. Rose and the company’s new CEO, Matt Williams, who joined on Sept. 1, began scrambling to restore features that had been dropped, such as a “bury button” that lets users vote down stories they don’t like. “We very much disappointed our user community, and we’re deeply sorry,” Williams says. “We have very passionate users, and I know we can return Digg to a place they love.” But Digg’s traffic had begun to slide even before the bad redesign, due to a much larger problem: Twitter. That site started out as a way to let people blast out 140-character posts, but has evolved into a way for people to pass along links to news items they find interesting. Williams insists that Twitter and Digg perform completely different tasks. That’s true. They are different. But this is how disruption happens in tech. It’s hardly ever about direct competition. Rather, something comes out of left field and provides a new way to do something. There have been plenty of Digg clones, but none of them ever hurt Digg very much. And nobody could have predicted that Twitter would take the place of Digg—not even the guys who created Twitter. And, if history is a guide, Twitter itself will be disrupted by something equally impossible to predict. This is why Facebook’s Mark Zuckerberg said at a conference a few months ago that “the biggest competitor for us is someone we haven’t heard of.” Can anyone create an enduring business on the Web, where it’s easy to build new companies, and when survival depends on the whims of fickle users? The big lesson of Digg may be simply this: if someone offers you a ridiculous amount of money for a company that wasn’t that hard to build, don’t think twice. Take the money and run. Read More