Digg's Sorry Revenue Stream, And Rumors Of An Experimental Ad Product
So Business Week gets their hands on Digg's financials and reports that the company had 2007 revenues of $4.8 million and losses of $2.8 million. The first three quarters of 2008 Digg had revenues of $6.4 million and losses of $4 million.
Context & Ripple Effects
Reports in 2007 that Digg had hired a bank and was seeking a sale of $300 million or more framed the company as an exit candidate; a December 2008 report that it was not for sale shifted attention back to its standalone business.
The disclosed revenue and losses give that shift a financial basis. They also put the unconfirmed report of an experimental ad product in the context of a company needing to improve monetization rather than relying on sale speculation.
First-order effects
- Digg's reported losses in 2007 and the first three quarters of 2008 put improving monetization at the center of its near-term operating challenge while it remains off the market.
- The experimental advertising product remains unconfirmed, but any such test would be judged against Digg's disclosed gap between revenue and losses.
Second-order effects
- Potential investors and buyers can evaluate Digg against reported operating results rather than the earlier $300 million sale expectations alone.
- A new ad format would raise the bar for Digg to show that experimentation can produce revenue growth sufficient to change its loss profile.
Third-order effects
- If privately held web companies continue to pair exit narratives with recurring losses, valuation discussions will face more scrutiny of the underlying monetization model.
The trend: The story is one data point in a shift from valuing web companies chiefly on exit expectations toward demanding clearer evidence that advertising can support the business.