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Chronicles

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How Digg Found a Way to Make Money

Social networking behavior — endless repetitive page views, unvetted content — isn't a great fit for traditional forms of online advertising.  Early attempts to bring search or brand ads onto sites like MySpace and Facebook had pathetic results compared …

GigaOM Liz Gannes

Context & Ripple Effects

Digg has spent years trying to convert its community-driven traffic into revenue without breaking what makes the site work: its 2007 push to go deeper with social networking was about engagement, and its earlier history includes the top-stories gaming scandal that showed how much economic value hangs on the front page. The problem this piece addresses is structural — endless repetitive page views and unvetted content deliver weak results for traditional search and brand ads, a pattern GigaOM notes also played out on MySpace and Facebook.

The confirmed relationships around the same date frame the wider squeeze: Facebook deprecated application notifications to cut spam, forcing third-party app developers off free viral channels, while Google began folding Facebook Pages updates into real-time search. Against that backdrop, Digg landing on a workable money-making model is a signal that social sites may need formats native to their own behavior rather than imported ones.

First-order effects

  • Advertisers on Digg gain a revenue-tested way to buy placement on unvetted, community-voted pages where conventional search and brand ads had performed pathetically.
  • Facebook's third-party app developers lose the deprecated notification channel and face paying for distribution instead of relying on free viral messaging.

Second-order effects

  • MySpace and other social networks with the same repetitive-page-view economics come under pressure to replace borrowed ad formats with units designed around voting and community signals.
  • As platforms charge for reach that notifications once provided free, marketing budgets shift from viral tactics toward paid social distribution — reinforcing Google's move to index Facebook Pages status updates in real-time search.

Third-order effects

  • If Digg's model holds, social media monetization consolidates around native formats that mimic community content rather than interrupting it — a template that determines which social platforms become sustainable businesses.
  • The distinction between paid placement and organic community content blurs, raising the prospect of disclosure rules or trust standards for voted-on commercial content.

The trend: Social networks are moving from imported search and banner advertising toward native ad units built on their own community-engagement mechanics, because user behavior there defeats traditional formats.