Should Digg hire a sales force?

Should Digg hire a sales force?

Summary: Currently, Digg outsources its advertising via deals with Google and Federated Media. Should Digg build a direct sales force to bolster its monetization potential and revenues?

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TOPICS: Enterprise 2.0
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In “Can Digg go mainstream?” I underscored Digg’s omnipresence in the tech community while asking if Digg can succeed in efforts to diversify beyond its passionate, but narrowly focused, “94% male and generally twenty or thirty something techies” user base and content focus.

 

I also touched base with Kevin Rose to get his direct input:

 

DB: What is the demographic makeup of Digg's total user base now?

KR: The Digg user base is growing rapidly and becoming more diverse.Traditionally, it has skewed to the 18-35 male group, but we are seeing many new users outside that demographic now as Digg has expanded its features and content offerings.

Rose expressed enthusiasm for Digg’s content and member diversification strategy, but did not offer any hard data in support of his assertions.

Jason Calacanis questions Digg’s ability to go mainstream as well:

The hard truth: digg is never going to go beyond this group on the digg.com domain name. Now, this isn't a digg to digg, this is just a fact of life and some friendly advice to Jay and Kevin. When you build a huge, passionate community like digg has (and Fark, Slashdot, Engadget, iVillage, and the Well have), you live and die with that group. If digg wants to go big they should start a second digg for women, and one for politics--they shouldn't do it as part of digg.

Older folks, women, folks interesting in things like politics, travel, or fashion will never live at digg because the community eats them up and spits them out when they try and participate.

Calacanis’ other key Digg point mirrors my frequent assertions that Web 2.0 free-to-the-consumer “popular” properties must invest in their own proprietary sales efforts if they are to ever build stand-alone, viable businesses.

The real challenge for Kevin and Co. at digg now is that they probably raised their $8.5m round at 60-80M post-money. That means that the latest round of investors are going to look for 10-20x that amount as an exit. That's a 600M -1.6B exit. That means they have to get to $30-50M in revenue. That means that Kevin is right when he says they have no interest in selling the company--they've got 4-5 years of work to get to those revenue numbers... start building the sales for now because to hit those numbers you need a 20-person sales team.

In “Web 2.0 monetization by Google AdSense, Where is the business model?” I note that “Ads by Goooooogle” are ubiquitous online and discuss how Google has succeeded in making AdSense the go-to monetization strategy for Web 2.0 properties of all sizes and styles, at the expense of solid business models.

 

Last July I pointed out Digg’s reliance on Google for its revenue model, in “Web 2.0 financial success: Easy as ‘two weeks and $700 bucks’?”: 

 

Digg, apparently, was launched without a pre-determined business model and is currently using Google AdSense for monetization of its traffic.

 

In “Facebook outsources ad sales to Microsoft: Why can’t it make money on its own?” last August I asked “Why do Web 2.0 stars insist on splitting hundreds of millions of dollars of advertising revenues with third parties?”

 

Digg upped the financial ante last month with a fresh infusion of $8.5 million in VC funding (see “Digg digs up $8.5 million”).

 

Currently, Digg outsources its advertising via deals with Google and Federated Media.

 

Should Digg build its own direct sales force to bolster its monetization potential and revenues? WHAT DO YOU THINK?

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Topic: Enterprise 2.0

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  • RE: Should Digg hire a sales force?

    I should imagine that it makes financial sense to outsource
    or they wouldn't be doing it.. it really is that simple!
    These company's (as I am sure the educated zdnet readers
    will already know) are not 'run by Tom' etc they have very
    smart and froogle analysts who assist in their P&L
    forecasts and wouldn't do it if it meant they would loose
    money by doing it.
    Some of the more 'fuzzy' elements of online advertising
    can't be so successfully predicted - i.e would a 'in-house'
    sales force be more inventive.
    However there is one thing you can be sure of: economics
    of scale, a web advertising firm can offer its services to
    many company's at once far cheaper then each of those
    company's doing it themselves.
    You also have to take into consideration other factors like
    maybe microsoft told facebook they would only buy 200
    million dollers worth of shares if microsoft could handel
    the advertising and likewise with google and myspace...
    when you add in those factors then it makes total sense for
    them to do what they do. It shifts the gamble and risk to
    google and microsoft when maybe facebook and myspace
    know very well that they will end up with the better end of
    the deal.
    The web is a very fuzzy place that is full of cost shifting
    and risk shifting.
    .comdave