Several years ago, I talked to Jay Adelson, the CEO of Digg (a popular news rating service). We discussed the keys to successful ventures and the importance of building an enduring platform. I liked when he said that it is critical to have an "unfair advantage."

Well, so far, things seem to be working nicely. In fact, Digg has raised $28.7 million from a group of investors including Greylock Partners, Silicon Valley Bank, Highland Capital Partners and the Omidyar Network. In all, the firm has raised about $40 million.

The capital is meant to reinforce the Digg platform. This means doubling the staff, which now stands at 75 people, adding new features like publishing analytics, and moving into foreign markets.

Of course, there have been many rumors that Digg has been exploring sellout talks with biggies like Google (NASDAQ: GOOG). But with the current uncertainty in the financial markets, it probably makes sense to wait things out. Besides, Digg has a highly loyal user base who may not want to see a deal get done.

Yesterday on the tech news site TechCrunch, it was reported that Google, Inc. (NASDAQ: GOOG) may be buying social news website Digg.com for up to $200 million. Now, Digg.com has come under acquisition rumors so far, but this is the most serious one. Google stands to keep its iron fist over the controlled flow of information with the purchase if, in fact, it is officially announced.

Digg.com, which has propelled itself into the limelight by having its members and readers publish links to news stories from around the globe and vote on them to let its customers choose "headlines," is no small potato.

Although Google was rumored to have been in the chase for the company back in March, it should go ahead and just make the announcement official. Integration of Digg.com into Google News (which is already an excellent product) would take Google's news aggregation product to the next level and would assist it solidifying its daily news position against the likes of Microsoft Corp. (NASDAQ: MSFT) and Yahoo, Inc. (NASDAQ: YHOO).

Digg.com would not be a good fit for Microsoft, however. While Microsoft continues to roll out web-based properties and products, many of its actions seem to be compelled by a "me too" attitude more than a corporate strategy, regardless of what the company says. Google, right now, has the cachet and the product breadth to continue steamrolling much of the competition -- and a Digg.com purchase would just make it stronger.

Many years ago, I stopped my subscription to the Los Angeles Times. The main reason was that I could find much of my news for free on other sites.

Like many other traditional media companies, the L.A. Times didn't make a smooth transition to the Web. Even though it's located in the heart of Hollywood, it's been TMZ.com that has built a strong entertainment franchise.

Well, the L.A. Times hasn't given up. In fact, the company has made a strategic investment in Mixx, which is a social news site that's similar to Digg.com. The amount was not disclosed (other than it was a "small" stake).

All in all, it looks like a good move. Mixx has a stellar team with backgrounds at places like Yahoo! Inc. (NASDAQ: YHOO), AOL and USA Today.

Basically, I think it could be a good way to get some insight into the fast-moving social media world. And sometimes it's better to be late to the game. After all, don't the pioneers often have arrows in their back?

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

It seems that every couple months there are new buyout rumors regarding the fast-growing social media site, Digg. And, yes, the rumors are buzzing again. The culprit this time is the Valleywag blog.

Of course, the suitors include old media stalwarts that – yet again – can't seem to shoot straight in the new media world. They would include such companies as the New York Times (NYSE: NYT) or the Washington Post (NYSE: WPO).

Oh, and the price tag for the deal is $300 million to $400 million. But, hey, in light of Microsoft (NASDAQ: MSFT)'s investment in Facebook, this seems cheap-o.

Ironically enough, Digg recently signed a $100 million ad deal with Mr. Softy. In other words, it seems like Microsoft may be to blame for the craziness in the social media world, huh? And, as a result, it may be making it very expensive for old media companies to buy into the space.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Not long ago, Digg was the super-cool site. It got on the covers of national magazines and was the talk of the tech digerati. Of course, things have changed – and now Facebook is the "in" thing. But Digg is not giving up. That is, the site has been adding social networking features, such as sharing, messaging, and so on.

So is it going to make a difference? Well, I had a chance to interview Robb Hecht, who is an expert on social networking and operates MEDIA 2.0. According to him:

"Digg has excellent intentions making its site more of a social networking play akin to MySpace and Facebook. Via adding 50+ new social features, the site clearly has plans to continue to grow and reach mainstream users by giving them the capability to shape their identities (digitally self actualize) within the Digg community.

"But, while Digg goes mainstream, it will alienate its core tech savvy community who will likely leave for other niche properties focused on tech -- that is, the site's initial power users. This seems okay with Digg. Instead of looking back to its core base, the site appears to want to forge ahead and shed its 'geek hub' image and reshape its brand reputation to take on MySpace and Facebook.

"As social networking tools proliferate across the internet, Digg may be on to something. With internet users being bombarded with social networking invites from all their friends, the trusted key brand names in the space will draw the most users. Digg wants its brand to be among the top three. And I think its new features will take it to the next level."

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Digg, the reader-generated news site, has fired Google (NASDAQ: GOOG) as its advertising partner, and hired Microsoft (NASDAQ: MSFT). The world's largest software company will sell text ads across the site. Digg has 9.5 million visitors in June.

The Web 2.0 world had trouble figuring the deal out. TechCrunch said that Microsoft would loss money on the deal because it had offered revenue guarantees to get the business. The blogging section of ZDNet could not figure out why Microsoft would want the business. TechTree points out that Redmond has a similar deal with Facebook.

It appears that, even if Microsoft initially loses money, it wants to control as much of the Web 2.0 ad space as it can. It understands that most of these partnerships come at the expense of Google and that there are only a few large Web 2.0 sites.

Microsoft has done this before in the online portal, game console, and multimedia player business. Get in, lose money, and hope to pick up market share. The company's track record in most of these businesses is not very good.

Douglas A. McIntyre is a partner at 24/7 Wall St.

There may be many good reasons to own an iPhone from Apple Inc. (NASDAQ: AAPL). Although I still haven't gotten my hands on one, I have been able to get a good look at some of what the device can do. Perhaps these aren't the ten best reasons, but they are ten good ones.

To the best of my knowledge, all of the photo gallery images that I'm providing here for you have been sent using the iPhone. Though I'm impressed, I did notice that the iPhone image quality declines slightly as light levels decrease, but it still does remarkably well for a phone. Yes folks, the attached gallery pictures were sent by mobile phones.

The gallery images are all at original resolutions and are all unretouched. If it is true that we can now take digital images of this quality and instantly download them to our favorite picture manager as well as e-mail them to anywhere in the world that we choose, it is my opinion that the makers of memory cards for digital cameras had better be working on some new product ideas, because I'm guessing that image data storage has just taken a turn for the best.

Please do enjoy the gallery.

News Corp.'s (NYSE: NWS) MySpace social network site will start to aggregate news and allow its 160 million users to rank stories.

As the content is ranked, it will be pushed down several "channels" like sports and entertainment. Advertisers can then wed their campaigns to the kind of content that they want to target. According to The Financial Times (subscription required): "The response from advertisers so far has been fantastic," said Brian Norgard, co-founder or Newroo, a news aggregation service that was acquired by News Corp last year and integrated with MySpace. "Every advertiser wants to reach a specific customer and we are helping them to do that through these [news] channels."

Well, maybe. Time Warner's Inc. (NYSE: TWX) Netscape and independent company Digg.com have been working this model for quite some time now. A look at their websites would not indicate that there is much targetting going on there beyond Google Inc. (NASDAQ: GOOG) text ads.

The problem with news ranking products is that they don't have huge audiences. Digg ranks No. 86 and Netscape ranks No. 539, according to Alexa. Traffic to both sites also is declining, making them less attractive to advertisers who spend most of their money on the top 20 sites.

MySpace obviously has a huge audience, but the advertising success of its news ranking service will depend on how many of its users decide that they want to rank news.

Do people go to a social networking site to do that? Maybe not.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Digg Inc. of San Francisco has been subject of many rumors as the next social networking site to be purchased by one of the bigger Internet companies. Well, at least for now, Digg will remain independent as it raised $8.5 million in new financing from Greylock Partners and the Omidyar Network -- eBay Inc.'s (NASDAQ:EBAY) founder investment group.

Digg is a site where users submit links of news articles, blog posts, podcasts and videos as well as other Internet content. Readers vote on the submissions, or rather "digg" them. The items with the most diggs stay published on the site in order of their ranking (the amount of diggs).

Digg, a two-year-old start-up, has become increasingly popular and now ranks among the top 100 sites or top 150 sites according to different measures. Digg has been the subject of much discussion regarding the its acquisition by larger media players.

Digg is not without competition and the company has yet to reach profitability. However, its independence does make it unique and with this infusion of funds the company could concentrate on development of personnel and features as its Chief Executive, Jay Adelson said.

Can you believe this? Yahoo!, Inc. (NASDAQ:YHOO) started the week at $23.21 and finished it up 9.18% at $25.34. Is Yahoo! back in favor?

Everybody, and I mean everybody, seem to think they know best what Yahoo! should do next. I find a large discrepancy between what mainstream media or wired news say, and what alternative media such as blogs say.

For example: Last week, Cramer, the CNBC guru, had a few suggestions, all of them involving acquisitions of what he deems to be growth companies. This week, it was Fortune's writers' turn to offer Semel, Yahoo! CEO, some advice. The way they see it, Yahoo!'s options boil down to four: Yahoo! should buy Time Warner, Inc.'s (NYSE:TWX) AOL, Yahoo! should sell to Microsoft Corp. (NASDAQ:MSFT), Yahoo! should merge with eBay, Inc. (NASDAQ:EBAY), Yahoo! should stay the course.

Now let's look at alternative media: Seeking Alpha makes the point that to beat Google, Inc. (NASDAQ:GOOG), Yahoo! should concede search. An interesting and provocative point, don't you think? Then, the writer says, Yahoo! could concentrate on its strength -- verticals -- and probably acquire Technorati in the process too.

I'm not saying one advice is better than the other, I just wanted to point out a problem that could also be plaguing Yahoo!'s management - conformity in their way of thinking. Perhaps Semel needs to add some people who can think outside the box and offer new strategies. Otherwise, Yahoo! would constantly continue to miss the good deals and opportunities, just as it might be losing this one. News Corp. (NYSE:NWS), which brilliantly snatched MySpace, may now be in discussions to acquire Digg, according to rumors.

So while Yahoo!'s stock performed remarkably well this past week, I do want to hear an occasional rumor about its talks with some young, trendy company. Until Yahoo! realizes that potential, it may not be back.

Web2.0 was supposed to be the next big thing on the Net. And, yes, there were some cool technologies, like Flickr.com, Writely, del.icio.us, and Digg. Biggies like Yahoo!, Microsoft, and Google even snapped some of these up.

But there's a problem: while these sites are definitely cool, the business model is often hazy. After all, when you give something away, you need either a premium product to upsell or a lot of users to monetize things with advertising.

Well, we are finally seeing signs of trouble in the Web2.0 world. For example, PubSub recently closed shop.

Interestingly enough, some of these failed companies are finding some liquidation value on eBay (yes, despite a terrible stock performance, this company definitely has a killer business model). I wrote about one for BloggingStocks recently, in which a community search engine decided to sell out.

The most recent to hit eBay is Kiko, an online calendar site. In fact, the company's investor wrote a blog post on the demise, blaming the "do no evil" Google.

As for the eBay listing, there is currently one bid – for $49,999.99.

I talked to Gordon Gould, who recently raised venture capital for his Web2.0 startup, ThisNext. According to him: "We looked long/hard at whether to raise institutional money or not for ThisNext . We decided in the end it made sense to do so. The 'build it for no money' opportunity is highly problematic, particularly if you are in a crowded marketplace (and the web services marketplace is currently very crowded). More broadly, taking VC money can help a company weather macro and company-specific economic downturns. I started Upoc in 1999 and raised an $18mm round in early 2001. If we had not raised that round, Upoc would have been crushed by 9/11. Our VC's basically gave us the working capital to survive the downturn. VC can also help companies not make every product decision to be a 'bet the company' type of scenario where you can afford to experiment a bit. Taking no money usually means if you make a mistake, you die."

Tom Taulli is the author of various books, such as the Complete M&A Handbook and operates InvestorOffering.com.

I subscribe to BusinessWeek (actually, it's one of the few printed publications I still subscribe to). One thing I can count on: Do the opposite of whatever's on the cover.

It's a can't-miss investment strategy.

After all, in 1979, the magazine had a cover story that read: "The Death of Equities." Basically, the article recommended putting your money into gold.

Another good one was a cover story in late 1997, which talked about Netscape killing Microsoft. Yea, right.

OK, I checked my mailbox today and what did I see? The front cover of BusinessWeek says: "How This Kid Made $60 Million in 18 Months."

The kid is Kevin Rose, the founder of the very popular site, Digg. Digg is based on the concept of citizen journalism, in which users vote on stories – and through a Darwinian process, only the most popular get visibility. Yes, it's a Web2.0 play.

Several months ago, I met with the CEO of Digg and we had a good talk about tech startups, valuations and so on. From what I can tell, Digg is a pretty tight ship.

But, for every Digg, I see too many Digg-wannabees. Basically, there are too many bad companies. And these companies are getting millions from VCs.

And, with the cover story on BusinessWeek (implying you too can "strike it rich"), expect there to be a flood of money into consumer Internet plays.

The problem: competition will weigh down on the good companies.

Something else: to have real valuations, there needs to be a healthy mergers & acquisitions (M&A) environment, as well as IPO market.

In the consumer Internet M&A market, there have not been many big deals (although, there are some, like the $102 million for XFire). Perhaps, the problem is that mega-dollar deals, such as eBay's purchase of Skype, are not panning out. Even MySpace is having challenges monetizing its enormous traffic.

True, there are rumors of mega offers for companies like FaceBook and YouTube. But, these are still just offers.

As for IPOs, it has been awful. Traffic.com, for example, is down 57%. Or look at Vonage, which over the past few months has plunged from $17 to $6.91.

In other words, these new-fangled companies might have to do what Google and Yahoo have done; that is, build business models that generate huge amounts of cash.

So, thank you BusinessWeek. Looks like another great call.

Also, by the way, here's my video of the CEO of Digg:

As a writer, I need to submit my work to an editor.  Yes, the editing process can be grueling – but it makes my work better.

In October 2004, two tech veterans -- Jay Adelson and Kevin Rose – had an interesting brainstorm: Why not allow anyone to become an editor?  Thus was born Digg.com. Users submit stories to the site and the community can vote on them. The more diggs, the higher the priority a story gets.

Now, Digg is the third largest tech site, with about 8.5 million unique visitors in May.

Giving power to the community is certainly catching on (it's being called the "social web"). There is YouTube.com for videos; Wikipedia for an evolving encyclodpia; and even Yahoo! is getting involved, such as with its Answers service.  In fact, AOL is using its Netscape.com portal to allow for a Digg-like experience.

This week, Digg launched the new version of its site.  The big move: it is going beyond just tech news.  Now, you can Digg on World and Business, Video, Entertainment, Science and Gaming.

I had a chance to interview Adelson:

Netscape.com has been reinvented as a web 2.0 media site. A division of Time Warner, the Netscape.com homepage has been through a whole bunch of remodelling, and is now being unveiled as a mix of news reporting, blogs, and a lot of the latest social online networking apps built in.



Early buzz by websites bill it as a 'Digg-clone' (a nod to the popular news website that uses user votes to propel linked news articles or other various links up to the front page), but arbiter and monitor of all things web 2.0 Tech Crunch points out that the new Netscape uses an interesting combination of user votes and an editor who promotes highly voted stories to top of the page.

As Tech Crunch also notes, with some 811 million hits a month, a lot more people visit Netscape.com than Digg. Netscape.com stands a good chance of becoming a major chaneller of online traffic. As getting 'digged' or 'slashdotted' or 'boing boinged' is one of the ultimate badges of high traffic-dom online we might soon have to add 'netscaped' to the vocabulary.

I really am impressed with the idea of melding the social voting side of the web 2.0 world of sites like Digg with human editorial oversight. I think pure voting leads to a tragedy of the commons, where what happens is you get light fluffy interesting things pop up, but the real digging that a dedicated editor can do is lost. Slashdot's strength shows what having editors can net you. Certainly this is by far more interesting than the purely mechanical Google News approach. I do agree with Pro Blogger Darren Rowe that it is annoying to click the links on the stories and not go directly to the stories in question. I'm shepherded within Netscape.com an extra layer, but this is another chance for Netscape.com to serve ads, and for financial viability it's an obvious choice. I think, though, it does bleed out a little bit of trust for some users.

That's all the online applications considered. The biggest break and step forward, and where this new model really lifts the best of all worlds and moves forward, is that there are editors who are paid to comment on the news stories and fact check them, as well as do additional research. Fact checking mass media in public and augmenting their stories with people who are paid to do nothing but keep track of this stuff has the potential to really make an interesting new hybrid. Even though I work for Weblogs Inc. this was my first time seeing it tonight, and I'm quite taken by the whole idea. At first I did dismiss this as an AOL Digg-clone, but I think it has the potential to be a completely different animal.