Story of the Week: The lessons of Digg

As news broke that the social news sharing site Digg had been sold for less than it raised in funding, several tech commentators suggested it served as a cautionary tale for hyped start-ups and widely used social media services.

In Digg’s case, it was the community that held much of the site’s power and without its users, the product lost much of its value, wrote The Atlantic’s Alexis Madrigal.

“Social networking companies are not technology companies as much as they are community companies,” argued Madrigal.

Betaworks, which purchased Digg, faces a significant challenge, wrote Erin Griffith of PandoDaily.  She added that if Betaworks can revive the Digg brand, keep “its existing users happy,” and make the jump to mobile, “it may be the Internet’s first ever turnaround story”.

For now, Reddit has filled the social news-sharing void. Indeed, according to Forbes writer Paul Tassi, it was probably Reddit that lay behind Digg’s decline, not Facebook, as some accounts have suggested.

Could others follow in Digg’s footsteps, matching the decline seen by social media sites like  Bebo before? When it comes to the rapid changes in fortune in the social media world, sometimes it seems as if anything is possible.