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The Shot Heard Around The Web 2.0 World: A Look At Digg’s Ugly Financials

Posted by Timothy Sykes on Sat 20th of Dec, 2008 08:45:00 AM
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When I saw THIS AlleyInsider article on Digg’s financials, I literally Laughed-Out-Loud…

I mean that’s all one can really do when you think about how much press and hype this cool but ultimately failing company has gotten over the years.

Look for yourself and try not to crack a smile at how wrong everyone’s gotten it:

For a site that gets as much traffic as Digg.com does — 22.6 million monthly uniques, according to Quantcast — the numbers are gruesome:

Last year the company lost $2.8 million on $4.8 million of revenue

In the first three quarters of 2008, Digg lost $4 million on $6.4 million of revenue.

Digg wanted to sell for $300 million last year, but took funding this fall to set its valuation at $167 million

LOL. Seriously, that’s not a business, that’s a joke. A joke that isn’t even worth $167–the price of my sushi dinner for two last night that’s not only healthy but tasted great, nor will it cost me $4 million every 9 months!–let alone $167 million.

Those are the financials of a pump and dump penny stock…ticker DIGG. If the stock price ever spiked, I’d follow my PennyStocking strategy and the short the crap outta it…and today, I’d be banking because their shitty business reality just poked a big ass hole in their geek-hyped “story”….as in the CEO and all the geeks in the world can lie to themselves/reporters/others about how exciting the future is, but they forget that in order to make it into the future, you need a sustainable business, not just some whiny attempt to get bought out at geek-dreamed up prices (which is why businesspeople run the world while geeks can’t get girls/play video games/do the grunt work).

The next reporter who writes anything favorable like the gullible schmuck TechRadar writer Marc Chacksfield just wrote on December 2nd, 2008:

It’s not as if Digg is struggling to make a profit, though. In the last year the website has said to have tripled its revenues and an upbeat Adelson expects “another tripling if not more” in 2009.

…about how cool their technology/popular/useful Digg’s site is should be publicly tarred and feathered…to be made an example of for all other media idiots who have been duped by Kevin Rose and the rest of his stock promoters employees.

$167 million valuation my ass, the site’s not worth the code it’s written on!

Kevin Rose’s other site Pownce was just recently shut down because–I’m guessing here–they had similarly ridiculously sized losses in relation to revenue and more importantly, revenue growth.

AlleyInsider goes into their typical media expert analysis with:

To some extent, this is an indictment of Microsoft, which sells ads for Digg. Why is there an ad for Hollister in Digg’s auto section and not an ad from a carmaker?

Gawker Media, which has very similar traffic to Digg, also breaks its traffic into ad-friendly categories and it does “rather better in revenue,” owner Nick Denton told us after looking at Digg’s numbers. Here’s one reason why: Gawker lets advertisers run huge ads and re-skin its sites. Digg forces its advertisers into tiny little boxes and banners.

Digg’s costs are running at $14 million or so a year. Why is that number so high? The site has no editorial.

…but I’m more interested in putting things into perspective for you guys who are more interested in col hard cash: my little blog averages 3,000 visitors/day, around 1,500 or 2,000 uniques so let’s be generous and say 24,000 monthly uniques compared to Digg’s 22.6 million uniques…and yet my blog brings in over $50,000/month, the vast majority of it pure profits–let’s say $40,000 or $480,000 in profits/year….for me to be doing 1% of Digg’s traffic while remaining wildly profitable with tremendous growth and very few expenses, well, this is just a case of somebody who spends the vast majority of his time tweaking and becoming more efficient/profitable vs. geeks obsessed with the latest and coolest while being horrible businesspeople.

You’ll find these kinds of awesome traffic numbers with pathetic business models all around the web, very sad, but also very fleeting…

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  • tbohen
    Its pretty simple really Tim, you actually have a "product" and provide "value" on your sites.

    "You’ll find these kinds of awesome traffic numbers with pathetic business models all around the web, very sad, but also very fleeting…"

    Your site isnt just a digital dumping ground of links etc. waiting for the next "cooler" replacement to come along.

    I see the same thing happening to myspace/facebook eventually, all you have to do is come out with some new feature and BAM everyone leaves, theres no reason for them to stay.
  • matterhorn
    Wow! Stocktwitter looks like digg you know! Good luck!
  • There are at least two web 2.0 companies that have a solid business model 37signals and Yammer.
  • ®
    Why are you always so belittling of everyone's efforts Tim? I feel like you never have anything positive to say about anyone but yourself. That's your winning strategy!
  • ®
    P.S. You're an asshole and that's why I love you. But even assholes have a heart.
  • Hey TimLover,

    You seem like you can't even read TechCrunchwhich clearly states "Second, Digg shouldn’t be losing money. They have over 70 employees, the company recently confirmed, and plan to grow to 150 by the end of next year. That’s an awful lot of people for a company that outsources sales and content creation, and has little to do besides focus on keeping the servers humming."
  • timlover, i am one of the few who's had a profitable year this year in the stock market, u forget that not one of 10,000 stock mutual funds is positive on the year and yet my despised little strategy is up 250%...and you're right, i dont understand digg's business, i'm a stupid guy who only knows the words 'revenues' and 'profits'
  • ooops. The above link goes... nowhere (404)
  • Hey Someone,

    Why the heck does Digg have so many employees??? BTW many web 2.0 companies such as Twitter and StockTwits have no business model at all...
  • Someone
    Clemans,

    Be sure that Digg guys are much more knswledgable and experienced than we are. They have both short- and long-term objectives which you can not tell from just looking at the company statistics at one point in time.

    To me, someone like Tim Sykes coming out of nowhere and commenting on Digg or other companies business is far from ridiculous. Sykes is a kid and he is happy with his $500 per day game. Whether he is up 250% or 2500% does not matter. He is a "small cap day trader" and his return is absolutely NOT surprising. Go to Zecco.com community web site and you will see many kids playing with small cap stocks with more than 500% return. Ask Tim to implement his trading model with $100,000 or more. Then we will probably see a new DVD showing how Tim sucks.
  • Someone,

    Tim makes about 500K/year not from trading but from selling educational products and services. So go do your homework and until then stfu.

    Oh BTW Tim talks a lot about many crap companies another reason you should stfu about "Tim coming out of nowhere".

    Go to Techcrunch where they talk about one web 2.0 company after another and tell them how they're all idiots like you're doing here.
  • Someone
    Clemans,

    I completely agree with you that Tim is making money out of selling DVDs and his web site (so called) services to idiots like you. Good for him. Sucker like you are around and will be around for a while. So Tim won't go out of business anytime soon. Go and get some education. Guys in web 2 companies that go out of business are not idiots. They love what they are doing. They have got good education unlike you or Tim, and they are trying to start a business out of what they learned at school. Well, of course people like you will not understand them, neither can they ever do what the guys in web 2 companies do. Oh GOD, you suck more than Sykes, lol.
  • They're so educated they're losing millions.
  • Peter Ji
    Someone- the bottom line is making money. Shortstocking works, mutual funds don't. You're probably another disgruntled wannabe investor who lost money in the market and saw Tim's blog, so yo ucome here to flame us. Lol.

    Just buy a DVD and learn from the pro instead of giving us BS.
  • Ali
    Someone,

    It looks like if you don't admire Tim you will be called a loser. I agree with you on some points. Tim followers (or Tim) sometimes talk non-sense. Tim propaganda is based on tiny daily gains (like $500). Tim followers can't understand the difference between a micro account (Tim's) and the mutual fund multi billion-dollar industry. It is pretty obvious that mutual funds can almost never get a 250% gain. Gains or losses for mutual funds have nothing to do with Tim penny stocking. Are we comparing apples and oranges!?
    Tim pointed to the mutual funds tens of times to make the argument that the entire world is losing and he or TimAlert guys are winning. Pure propaganda to sell more DVDs or get more get-rich dreamers on the alert list.
  • matterhorn
    Tim,
    Most mutual funds manage billions of dollars. Why don't you start with a billion dollar account and up your account by 250%? Sorry, I forgot you closed your hedge fund after losing a large portion of its money.

    You yourself said that mutual funds and institutions do not trade penny stocks most of the time, because they are not interested in a 40K gain a year that small people like you and your subscribers do.

    I understand this is a niche you are good in, but indeed, you are comparing apples to oranges when you say mutual funds don't make money.
  • matterhorn
    "Digg’s costs are running at $14 million or so a year. Why is that number so high? The site has no editorial."

    Dude, do some research yourself before you open your mouth. Running a tech startup serving millions of page hits a day requires lots of servers, as well as developers, management, marketing. Not like your website that is probably running on godaddy and built by pallian and a couple of web designers.

    Money tech startups are not profitable for a while. Even successful companies such as Sony have their down years at times. Google didn't make money until they introduced ad sense.

    Do research yourself, which is what you have been telling people to do.

    Oh, I hope you apply the same analysis you did on Digg with Stocktwit yourself. Is stocktwit making any revenue or profit? Good luck.
  • i'm comparing apples and oranges because people with small accounts dont understand the difference, they're out there trying to compete with the big boys--since thats all they ever hear abotu from CNBC--when they should recognize their lowly status and use it to their advantage
  • Teddy
    There is a pervasive myth that tech companies have to lose money in the beginning. Add this to the unrealistic assumptions for growth that are at the center of any bubble developing (real estate and .com's anyone?), and what do you get? A company who thinks that they can grow themselves faster than they can burn borrowed money. Sometimes it works and you make a mint, most of the time it doesn't.

    Since all the lenders and investors have closed their purses, this business model is doubly screwed.

    Tim's bootstrapping approach is perfect for this type of environment. The web has made startup costs negligible, and enabled easy outsourcing. Tim's infrastructure will grow with his user base and he will be consistently profitable. Digg doesn't stand a chance.
  • Matthorn: you mean AdWords which launched in 2000. Adsense wasn't launched until 2003

    Digg is making money but it's not controlling costs. Now Twitter on the other hand isn't making money period whereas Yammer, Twitter for business, has been making money since day one.
  • Someone
    Clemans,

    Do you really think the Digg guys are stupid and do not understand the profit or the maintenance/development costs? They are one of the most successful web 2 companies to date. Of course their future success depend on providing new feature and further developments. Their school of thought is different from yours and Sykes. They don't care about making $500 in a day, and they never publish triple digit return on a tiny account to prove their success. Go get some education kid.
  • Someone,

    Oh so according to you it's OK for a web 2.0 company to be losing millions just because it's a web 2.0 company. Well I got news for you: 37signals is a web 2.0 company and it's very profitable see 37signals is one hell of a profitable business.

    Sure Digg could get very lucky and succeed but it's very unlikely they will given their failure to control costs.
  • Timothy Clemans
    Finally Digg laid off some people. 7 people (10%) were laid off. http://www.techcrunch.com/2009/01/22/as-growth-...
  • Vincent Chase
    Tim,

    Quit being a fag.

    While business is all about profit yes. It isn't all about profit right now.

    Youtube.com sold for a crazy amount, because these high traffic businesses are tools used by larger companies. Thats why they buy loss making websites. They can do things like integrate with parts of their business operating at higher profit margins.

    But the business of creating overvalued businesses and selling them worked out pretty good for youtube owners. And a lot of others.

    But never mind, you just go and celebrate making a whopping $500! or even $5000! Its not alot of money tim.

    Believe me stock promoters make alot more money than you, alot more. And I should know.
  • Vincent Chase
    I'd like to add:

    Why dont you go and tell Mark Cuban how much more efficient your business is than Broadcast.com.

    How much higher your margins/ return on assets/ profit per employee.

    Because you know what I dont think he'd give a shit. One day you may realise your not the quickest cat in the whorehouse.
  • stock promoters do make more $ than me, but they're soulless.

    and who said i was smart? just a normal guy with a good strategy and very not normal experience

    return on assets/ profit per employee? guy, its just me and my web designer, give me a few years before we create something massive, but rest assured, it'll be profitable
  • Timothy Clemans
    It's not just Tim and his web designer. His parents do the accounting and shipping and handling of products. Also his girlfriend and some interns help out.
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See Tim's full bio HERE. Tim turned a few thousand dollars into a few million by taking small gains time after time on hundreds of volatile penny stocks, discovering that his trading strategy, while consistently successful, works best for those with smaller accounts.

Determined to teach others this PennyStocking trading strategy (learn more HERE), he went back to his original $12,415 roots (already $58,000+ even though the stock market has crashed) to show everyone how to turn thousands into millions, even while having a life (somewhat) and making plenty of mistakes. Currently he is the #1 ranked trader out of 25,000+ on Covestor)

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Hard work, Determination and Know How.

Hard work to learn how the greatly misunderstood niche of penny stocks provides opportunities every now and then on which you should pounce.

Determination to seek those probable profits out and know how in order to actually profit from them.

Long story short, wait for stocks that are extremely volatile - for whatever reason - and then aim to take small profits (between 10 and 50% within a few hours, days or weeks) here and there, either from betting on higher or lower prices (yes, you can make $ betting on lower prices, it's called Shortstocking (learn more HERE).

Why Penny Stocks?

As Tim explains in several ALL-NEW instructional DVDs (see them HERE) and in over 2000+ blog posts, penny stocks are the most hyped and corrupt niche in the entire investment world. These two qualities make them the easiest to profit from (legally) because the vast majority of people who play penny stocks are suckers and all-around ignorant people. If you have any intelligence whatsoever, you have a clear advantage and it's like playing basketball against mental midgets.

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TIM Trades

View All
Date Stock Buy Sell Net
Nov 19 AENY $2.80 $3.02 $1148
Nov 18 NLST $4.16 $4.40 $947
Nov 18 IMGG $1.42 $1.64 $2094
Nov 17 NLST $5.04 $5.59 $2195
Nov 13 VRMLQ $21.50 $22.97 $2901
Nov 11 EONC $2.61 $2.80 $687
Nov 10 EONC $2.74 $3.36 $9784
Nov 6 QXM $4.31 $4.80 $1936
Nov 4 COT $8.66 $8.88 $642
Nov 4 QXM $4.61 $4.89 $822
Oct 30 DDRX $25.70 $26.53 $812
Oct 29 CTDC $4.00 $4.42 $781
Oct 26 AWSL $3.24 $4.10 $2516
Oct 23 RODM $5.27 $5.23 $301
Oct 22 AMLM $2.69 $2.97 $820
Oct 22 USEG $6.12 $6.09 $85
Oct 20 CBOU $8.93 $9.06 $243
Oct 16 VRMLQ $16.79 $18.65 $2773
Oct 13 YONG $11.05 $11.66 $1202
Oct 13 NPHC $0.59 $0.71 $583
Oct 12 IMGG $0.60 $0.70 $682
Oct 9 ZAGG $5.50 $6.10 $2380
Oct 7 GVBP $0.03 $0.27 $702
Oct 1 NPHC $0.70 $0.85 $1482

Total: $98,094 (681%)