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Digg, once the king of social sharing and news sites, lost its luster as sites like Twitter and Facebook became more popular. The founders left. The company was just about to fade into the great digital beyond, but Digg is having one more day in the media spotlight due to the sale of the final remnants of its existence.

Digging a Grave for Digg?

Digg, the company that was once the 24th most popular site on the Internet, has been dying a slow death. Now, the technical press is buzzing with news that Digg has sold its remaining assets -- the domain, code, data and all traffic -- for US$ 500,000 to Betaworks, a New York-based startup incubator that also launched bit.ly.

Matt Williams, Digg's chief executive, says the figure is not accurate because stock was also involved, according to the New York Times. However, he did not give a final price. Whatever the final price, it is nowhere close to the US$ 175 million that Digg was once valued at or the rumored US$ 200 million that Google offered.

As part of the deal, Digg shareholders will also receive equity in News.me, the business unit Betaworks plans to fold Digg into, according to Betawork’s blog. None of Digg’s employees are going to Betaworks. Williams will become an entrepreneur in residence at Andreessen Horowitz, the venture capital firm that is investing an enormous amount in GitHub, when the deal closes.

Betaworks isn’t the first firm to pick up pieces of Digg. Reports indicate the Washington Post paid US$ 12 million for the staff in May when it hired 15 engineers, and LinkedIn paid around US$ 4 million for 15 Digg patents.

Traffic began to drop in 2007 when Digg deleted users because they had used the network to crack HD DVD encryption. After a user revolt, Digg promised to halt the deletions. Then a report surfaced in Wired that fake users could push articles to the top of Digg’s ranking and drive traffic to their site; the author tested out the theory by pushing a useless blog to the top of Digg’s front page. Traffic kept declining when Digg released the fourth version of its site in 2010, which users did not receive well. Then, Digg co-founder Kevin Rose left the company in March 2011. 

The last funding round, which produced US$ 5 million in capital, ended a year ago. At that time, the site was still valued at approximately US$ 35 million and some reports indicated the company could have only operated 6 more months without the cash infusion. After that, the selling began like some tech industry garage sale. It seems, however, that Digg isn’t quite dead yet. Betworks says it is going to “turn Digg back into a startup. Low budget, small team, fast cycles.”

Not the End of the Story

What’s next for Digg? Betaworks will form a new unit that will combine the Digg assets and News.me. John Borthwick, Betaworks’ founder, will become chief executive of Digg. The new unit will be responsible for creating a new version of Digg that will be a complement to News.me’s iPhone and iPad applications.