Digg Fires 25 People in Effort to Stay Alive

The news only seems to get worse for social news-sharing site Digg. From an e-mail sent to the Digg staff today by newly hired CEO Matt Williams and posted on the company blog:

"Unfortunately, to reach our goals, we have to take some difficult steps. The fact is our business has a burn rate that is too high. We must significantly cut our expenses to achieve profitability in 2011. We've considered all of the possible options for reduction, from salaries to fixed costs. The result is that, in addition to lowering many of our operational costs, I've made the decision to downsize our staff from 67 to 42 people."

It's difficult to imagine that the layoffs took anyone by surprise, given that Digg has been struggling for months now under the weight of a disastrous site redesign and dwindling user numbers.

Daniel Lyons captured the essence in a Newsweek piece published just yesterday:

"Digg's collapse has become a cautionary tale for so-called Web 2.0 companies in Silicon Valley, even the current crop of superstars, like Facebook and Twitter. The basic problem is that these new-media companies don't really have customers; they have audiences. Starting a company like Digg is less like building a traditional tech company (think Apple or HP) and more like launching a TV show. And perhaps, like TV shows, these companies are ephemeral in nature. People flock in for a while, then get bored and move on."

In his e-mail announcing the layoffs, Williams promised, "Tomorrow, we'll go forward with a new strategy for Digg."

Good luck with that. TV shows don't generally pull out of these kinds of tailspins.

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