Wednesday, January 2, 2008

Digg - Buyer or Seller?

I'll get back to the discussion of deal points soon, but I saw an article in Business Week today that I really wanted to comment on. The article addresses the rumour about Digg.com being up for sale this year, as well as the other rumour that Digg might be buying a couple of competitors. Digg CEO, Jay Adelson gave BW a fairly open interview. He essentially denies that Digg is buying or selling, and focuses more on the company's relationship with Microsoft and plans for international expansion.

In reality, I imagine that Digg is both a buyer and seller if the right deal comes along. I think that's true for almost every company that's growing.

Digg is supposedly valued at around $300 million right now. If a strategic buyer offered substantially more than that, I'm sure Digg's management would think hard about taking it. The founders certainly don't need the money, but the landscape for digital media, social networking and other related Internet businesses is constantly changing. There is always risk of a disruptive change dramatically shifting the values of Internet companies in unpredictable ways.

And although Adelson says that Digg doesn't have enough of a war chest to go on a buying spree (as attractive as that might be), there are always creative ways to approach a transaction. In my experience, if there are two motivated and realistic parties, there is a deal to be made.

I'm not into making predictions, but I wouldn't be surprised to see some M&A activity involving Digg this year. It is a great company and this seems like the right time for management to make some moves. Digg is a top candidate to be the next major player in the digital media space, and that means some bold action might be appropriate.

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