Forget Paper Millionaire, Digg Founder's A Vapormillionaire
from the bet-this-story-won't-get-dugg dept
We’ve become very accustomed to stories about how this or that startup could be worth $x billion, though they typically offer little justification for that price tag. At least, however, they typically acknowledge that the price is speculative, and that a buyout is far from a done deal. BusinessWeek has decided to go a step further, with a cover story on Digg, and the title “How This Kid Made $60 million in 18 Months” (referring to Digg founder Kevin Rose). Forget any buyout, for BusinessWeek, it’s already a done deal: “So far, Digg is breaking even on an estimated $3 million annually in revenues. Nonetheless, people in the know say Digg is easily worth $200 million.” Of course, the article doesn’t identify these “people in the know” who figure that a profit-less site is worth 60x revenue. It also never explains how Kevin Rose made $60 million (probably because he didn’t actually make that money), though we’re guessing that they calculated his share of that $200 million, based on his stake in the company. Still, you’d think they wouldn’t ask their readers to guess about how they arrived at $60 million, since they saw fit to put that number on the cover.
And if all this sounds just a little bit dot-com-ish, BusinessWeek is prepared with a response: “It’s not as dot-com deja vu as it sounds. YouTube, the enormously popular video site, posts similarly fledgling revenues, but some experts say it could easily fetch $500 million.” Actually, such relative thinking should give anyone a bad case of dot-com deja vu. And there’s lot more of it too. At one point it suggests that Digg could become a cash cow like MySpace, a site that’s had problems monetizing its enormous base. As for MySpace, it insists that Rupert Murdoch got a steal because Facebook turned down a $600 million buyout offer. Yes, we fail to see the logic in that argument too. Okay, we’ll spare you any more. Suffice to say, BusinessWeek has written the ultimate Web2.0 hype piece without the slightest hint of skepticism about the numbers that it throws around. Digg very well may be sold at some point, and Kevin and the other Digg staff may make out very well. However, to suggest that they already have is pure bubble logic. Yeah, we’ve got some serious deja vu.