Wednesday, September 24, 2014

This Stat About Digg Reveals Biggest Difference Between Starting A Tech Company Now And Ten Years Ago


Google engineer, servers

Vox's Timothy B. Lee has a great story on Digg's comeback. In it, he reveals a super interesting stat.

It's a stat that explains why starting a tech company today is so different than starting a tech company when Digg was founded, ten years ago. 

First some quick backstory.

Digg was founded in November 2004. By 2009, it had 30 million monthly visitors. 

Google wanted to buy it for a couple hundred million dollars.

But by 2012, Digg's traffic was down to 1.5 million visitors a month.

That year, Digg sold for $500,000 to a New York holding firm called Betaworks.

Now Digg is back up to 8 million visitors a month. It's not profitable for Betaworks yet, but executives say there is a "realistic plan" to get there.

Anyway, here's the stat: Back in 2012, when Betaworks bought Digg, it cost $250,000 per month to keep the site running, even with its tiny amount of traffic. Today, it only costs Betaworks tens of thousands of dollars per month, with 5x as much traffic.

The reason for the cost disparity: Back in 2012, Digg was run off of servers owned by the company. Today, Betaworks rents server capacity from another company. Digg is hosted in the cloud.

Running a company from the cloud is standard practice these days. Netflix is still running from Amazon servers. Before it was acquired by Yahoo, so did Tumblr. Probably all the startups you can think of run this way. Only the really gigantic companies out there now own their own servers.

So whenever you see a list of a bunch of silly startups and worry that there's another bubble going on, remember that all those companies cost a lot less to run than all the dotcoms or even early Web 2.0 companies did.

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