Startup Police Blotter: Betaworks Steals Digg for $500k – Digg Sells for Pennies on the Dollar

Betaworks should be on today’s police blotter under Grand Theft Startup.

Wall Street Journal is reporting that the New York based incubator Betaworks has agreed to buy news-sharing website Digg in what is looking like a yard sale for $500,000.

Here is what the WSJ reported:

Under the deal, which Digg confirmed closed Thursday, Betaworks is buying the Digg brand, website and technology. The price was just $500,000, three people familiar with the matter said—a pittance for a company that raised $45 million from prominent investors including LinkedIn founder Reid Hoffman and Marc Andreessen.

Betaworks was one of several companies bidding to acquire the remaining assets of Digg after Social Code, a digital media subsidiary of The Washington Post Co., WPO -3.02% in May hired 15 members of Digg’s engineering team, more than half the company’s overall staff. Some of the other bidders which included other technology companies, traditional publishing companies and start-ups offered more for the Digg assets, but Digg decided Betaworks had the best plan for reviving its brand, the people said.

This is a fail for Digg as a venture from its’ position as the one of the leading social sites during the web 2.0 era. Betaworks is smart to pickup a great brand and social assets in Digg. It should be a straightforward pivot. The real assets are the talent and most have left awhile ago.

I am personally bummed because I loved Digg and the guys there. It’s been on life support for two year now so this is a final conclusion.

According to reports it looks like none of the remaining Digg employees are moving to Betaworks. Instead, the News.me team will take over the management of the site. Betaworks, says Digg, will soon unveil a new “cloud-based version of Digg” that will complement News.me’s iPhone and iPad apps.

Betaworks is acquiring a website that still has a well known brand and sizable audience of more than 7 million visitors per month as of May, according to comScore. The company intends to fold Digg into News.me Inc. a digital media startup that Betaworks launched in April 2011.

News.me sends users links to news articles that their connections on Twitter and Facebook are reading and talking about. News.me, which uses an iPad and iPhone app and daily email newsletter, has about 10 employees.

None of Digg’s remaining employees will join Betaworks as part of the acquisition. Chief Executive Matt Williams will join venture capital firm Andreessen Horowitz as an entrepreneur-in-residence.

By the end of 2008, Digg was one of the most popular websites on the planet, boasting nearly 30 million monthly visitors, according to ComScore. But the audience started to drift away in early 2010 as services such as Facebook and Twitter exploded in popularity, as users preferred getting article recommendations from their friends or people they followed.

This is a steal for Betaworks if the price is indeed $500,000.

What I would do with Digg if I were betaworks is take the traffic and merge in all the big data “mojo” from Bit.ly and roll out the most kick ass social news content site on the planet.

For insight into how they might do it watch my interview with Hilary Mason the chief data scientist of Bit.ly.

Video: SiliconANGLE.tv Cube @ Strata http://youtu.be/wKbh8jkYICA

Bit.ly is trying to crack the code on social discovery and distribution. I think that Digg will add alot to this strategy.

Good luck Betaworks and the new Digg.

About John Furrier

Founder and CEO of SiliconAngle.com.