$300 Million, You Digg?

Posted: December 19, 2007 in Consolidation, Content, Emerging Media, Interoperability, Social Media, Web2.0
Tags: , , , ,

Attention Web2.0 evangelists and all marketers large and small…The buzz about the potential (or impending) sale of theDigg $300MM? largest social bookmark brand, Digg, has picked up this week as VentureBeat and TechCrunch covered the news of Allen & Company’s engagement to shop the social media darling. Rumors and intuition all lead to Digg being acquired into a complementary portfolio of a large media company, maybe even one of the “big 4” (Google, Microsoft, Yahoo, AOL).

However, if Digg has quietly been on the block for months, with other significant investments and consolidation occurring all around them, what’s wrong? Is the $300million asking price too much? It depends on the strategy of the acquiring company. Many web 2.0 acquisitions are more about the potential value of an additional portfolio component, rather than the actual revenue based valuation as a stand alone entity. As Facebook attempts to grow into their $15 billion valuation, and other recently acquired web2.0 companies prove the value of their respective investments, will venture capitalists and media execs sit back and watch this next round unfold, or will the spending continue? Of course the answer is “yes”, and “yes”. Confused? So are they…

Enabling consumers to share content and experiences is a powerful catalyst for a large media company looking to tap into the social fabric of the internet. Social bookmarking/sharing sites help increase reach beyond the audience initial exposed to specific content, and it allows relevant content to “find its way to new consumers”. Social sharing also presents additional metrics that provide further insight into consumer engagement levels.

The social bookmarking brands have built their brands from the valuable real estate provided by content providers as a footer or side bar of every news item, article or piece of multi-media content. The motivation for content providers to insert this catalyst is obvious. However, to-date there have been no financially lucrative business models that have emergeed from the space. The value is in the collaboration and incorporation into an existing portfolio of media assets.

Just when Venture Capitalists and investors thought that the market stabilized itself back into the box of historic valuation models, the game changed once again (technically it changed a while ago, but it is now at a tipping point of social media consolidation). Welcome to the latest roller coaster ride of web2.0 valuations.

So, what does this mean for media planners/buyers?

The increased usage and popularity of social bookmarking sites and the consolidation of the space will represent new  opportunities as it relates to marketing relevancy and the ability to engage consumers. Social media metrics are increasingly becoming more important indicators of an audience’s reaction to marketing communication of various varieties. As marketing continues to become a relevant part of the consumer experience, the manner is which a consumer is influenced by or responds to marketing will change shape and form, and we need to adjust accordingly. Although I find that social bookmark sites are not in the average media planner’s regular bag-o-tricks just yet, the morphing space will soon be on many more radar screens!

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