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Sunday, October 29, 2006

Why Digg’s Self-Reported Numbers are Even More Flawed…

I was thinking about the Digg situation and it really amazes me that these guys truly believe they have 20MM unique visitors from the US to their website in a given month. I had looked at other metrics and all the other measurement firms were all estimating around 1-2MM.

It is clear that this disconnect in total visitors is a huge deal for anyone that would want to buy the company. I really think these guys need to get their act together before trying to sell again.

Let’s think about the difference in a revenue model for their self-reported numbers versus a measurement firm like comScore. The numbers are staggering.

If you assume that every visitor to Digg in a month, will return on average 2.5 times and views around 3 pages per visit. Note – this is based on data from Compete at their new site snapshot service. On top of that there are on average about 2 ads per page on digg, which would add up to 6 ad impressions per visit by a user.

So with these assumptions you have the following numbers:

Total ad impressions:
Digg: 420MM/mo
comScore: 23MM/mo

Then if you assume that Digg is receiving an eCPM of around $10, note that Federated Media site is selling the ads for, on average, $15 CPM. So $10 should be a conservative estimate if Johnny B. is performing for his FM Pub sites.

Add all of this up and what do you get? You get a major disconnect in revenue, which would concern even Ken Lay and his team.

The comScore numbers would suggest that Digg is probably making around $2-3MM in revenue per year for CPM advertising. The Digg numbers would suggest that they are making about $50MM per year in online advertising. Humm, with a staff of less than 10 people, why would Digg be looking to sell?


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