Google Doesn’t Dig Digg After All

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The Google/Digg acquisition negotiations were in full swing as of last Tuesday, had passed the term sheet stage and the two companies were in final negotiations in the $200 million range. But sometime this last week Google decided to walk from the deal. Digg was notified on late Thursday or Friday.

Google was in the due diligence stage of the deal, where they peer deep into Digg’s technology and financial statements. Most term sheets are non binding, so anything that gives the buyer pause can be used as an excuse to walk away – but generally the buyer already has a very good idea what they are getting well before the term sheet stage.

Two sources close to the companies suggested that some issue that came up during technical due diligence was to blame. One source said that the issue was more personality driven, and that Google decided after spending more time with Digg’s top team that there just wasn’t a fit.

Either way the deal appears to dead and can be added to the long list of failed Digg acquisition deals. And when a company is “left at the altar” other buyers are usually hesitant to step in.

So what will Digg do now? We’re hearing they’ll just push through with a new round of financing. Digg hired Allen & Co. to represent them in the sale, but the investment bank is just as good at closing massive venture financings, too (they represented both Slide and Ning in their recent a half billion dollar valuation financings).

[cb type=”company”]Digg[/cb]
[cb type=”company”]Google[/cb]

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84 thoughts on “Google Doesn’t Dig Digg After All

  1. TheAnand

    Hmm, as expected. Digg is a great community, but not really worth a buy for any company…at least thats what the recent failed sales show. I think google wanted Digg to attack yahoo buzz, but it somehow did not work out.

    P.S: whats with the free t-shirt for comment thingy :D

  2. Craig

    So, Digg is back on the market – not suprised at $200 mil.

    I’d be pretty pissed if Google went that far into the deal then backed out – especially since Google are building digg style functionality into their search…

  3. team ray

    digg imho held out too long to sell

    if they get more then 100 million i’ll be shock

    with so much competitors like reddit etc.. 200 million by google was fooolish

  4. TEKFIRM

    yeah especially with reddit releasing their source code , i dont see the value if digg for google , they could clone it and most digg users are techy (already google users)

  5. TEKFIRM

    it was just a linkbait to get backlings , Google is famous and if they are going to buy someone it will create a lot of BUZZ and backlinks :) , even shoe gave them a backlink :p

  6. crash

    I was expecting this to happen, just like it happened a few years ago when there were rumours that Digg has received an offer for 350 million dollars. Google will buy it, but not right now.

  7. sean

    In this market blowing a 200Million acquistion offer seems misguided especially when you are Digg and the shine has mostly worn off. Digg’s grave has been Dugg.

  8. ajaz

    Smart move by Google. Many mergers have failed because they found out to late there wasn’t a good fit. Due diligence is more than just looking at the books.

  9. Geordie

    Hmm, I wonder if they’re starting to follow Microsoft’s acquisition flirt model….cozy up, get a close look at the tech, then go replicate it for pennies on the dollar…

  10. TEKFIRM

    Most users dont click … i supose its on CPM .

    i dont know the info about the deal (microsoft – digg ads publishing) we might get an idea of revenue

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  12. Google Massacre

    I’m not sure I buy the “personality” issues as the reason for Google walking away. I suppose it depends on what exactly they were looking to get out of the deal, but if they were looking to acquire the technology and user base and then integrate it couldn’t they just buy the company and then swap out resources? There must be more to the story.

  13. Enkay Blog

    The comment thing is a contest that is going on where every day a comment is picked towards midnight CST and the winner gets a free shoemoney t-shirt.

  14. Enkay Blog

    They did kind of wait before they made the decision. I think they are using a similar digg functionality and their idea was to spend more and get an entire load of articles and user base with it but didnt work out.

  15. Enkay Blog

    Either way I’m sure that Google had more of a business sense to this whole concept of Digg than we do by looking from the outside. In the end, Google will still do what it feels best and what it finds as a good investment with a good ROI and competitive advantage. Not sure if blowing off Digg was a great idea but we’ll see.

  16. Erica DeWolf

    I have severe mixed feelings about this. In a way, i can see similarities to when google first started- nobody wanted to buy google from the pair who founded it, so they built it up and made millions on it themselves. On the other hand- this is the exact opposite situation. Digg has already been ‘built up” and been very successful. However they seem to be in a slump. And going downhill. If they don’t sell it soon and give it to some people with fresh ideas for it- it could die.

    Or they could decide to “build it up” again themselves and come back with a whole new better Digg. Only time will tell.

  17. Erica DeWolf

    I agree. However I don’t think it’d be worth $200 million to them…so I have mixed feelings. $100 million may be more around the ballpark I was thinking…I just feel that there were some great ideas being thrown around there about how Google could use Digg to enhance its services / search results.

    Digg is almost like a huge database of the most popular sites on the internet- people left comments. In the search results…there could have been the Digg comments right there….

  18. WebIncomeStream

    The only side who lost on the broken deal is Digg. They obviously facing financial problems and looks like having some difficulties finding outside investors…

    As a community Digg is nowhere near StumbleUpon or Yahoo’s MyBlogLog. If Google is so desperate for similar service they probably better off acquiring BlogCatalog…

  19. Mark Mitchell

    I would like to see it go through. Digg seems to be the direction Google is going in. I saw some posts lately about how Google is looking to integrate more “social” oriented mechanics into the SERPS.

  20. My Awesome Blog

    I hope it stays this way. I’d hate to see Google tainted by Digg.

    What I’d love to see is someone start a Digg like clone with one key difference – 50% ad revenue sharing with its users. Amazing all those people writing free content for Digg.

  21. Sohan

    I’m quiet glad they didn’t buy it. I couldn’t imagine a digg style search engine. Too much gaming would be going on.

  22. Chris Abernethy

    Could be that a lightbulb went on with Google’s dev team and they realized how easy it would be to replicate the functionality. Even starting from scratch, Google could probably easily eclipse Digg. Why waste 200 mil at that point?

  23. Popular Wealth

    3 words – “lack of control”. It’s no secret that the Digg front page can be gamed, some make a very handsome paycheck at it too. Its a tough pill (rep) to swallow for investors.

  24. Popular Wealth

    Actually something else bugs me about this turn of events, Google is already considering their own Digg like features for search… was this a glorified peek under the hood? I’m not accusing but that is what it feels like given that videos exist of Digg implemented into Google already.

  25. Action

    I didn’t see any value for Google in making this purchase, why exactly would they want digg? I agree I hope Google don’t incorporate a digg style into the serps in fear of the serps becoming gamed like digg.

  26. Mike

    I don’t see why all these companies buy each other out, is “online competition” to complicated… I think all the mergers are ridiculous… Why would anyone want to sell out?!

    http://md16185.blogspot.com
    (Feel free to comment & Subscribe to the RSS Feed)

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  28. Winning Startups

    I don’t understand why Google doesn’t just make their own version of digg instead of spending so much on the product. Surely they could make their own a lot cheaper.

  29. Zak Show

    I already discussed this with many friends, Digg is a great community but it does not worth $200m and if Google buy Digg it will impact search results and top stories too.

  30. Web Marketeer

    Digg has become a free for all, with SEO’s gaming the system almost at will. That caused me to wonder what this was all about when the first posts regarding the buyout started surfacing recently.

  31. Web Marketeer

    Seems nobody wants them. Feels a bit unfair for Google to withdraw after the honeymoon. Wonder how many secrets they learned? Can’t be good, if it led to the deal being cancelled at such an advanced stage of the proceedings.

  32. Web Marketeer

    That’s what it looks like to me. They had a good hard look at the goods on offers, with secrets obviously being divulged towards the business end of proceedings, and then turned and ran as soon as they learnt what they had to. So it seems, anyway.

  33. Web Marketeer

    The magical $1 million figure doesn’t carry quite as much weight as it did, say twenty years ago. You won’t get far on $1 million these days….

  34. Web Marketeer

    That makes two of us! Surely personality clashes can’t be a determining factor at such a late stage of the fight? Doesn’t make sense, and smells very fishy.

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