Rumor: Google To Buy Digg For $200 Million?

There are ways in which Digg is like YouTube: it’s the “brand” in a competitive “social news” segment that also features Yahoo Buzz, AOL’s Propeller, MySpace News, Reddit, Ask Big News and, by some counts, more than 80 others. Similarly, YouTube was the “brand” in a crowded video segment when Google acquired the company.

Digg has more or less been for sale for months and rumors have been circulating that either Google or Microsoft would buy the company.

Now TechCrunch is reporting that Digg is close to selling for $200 million to Google. That compares with the originally rumored $300 million price target.

Digg has a display ad deal with Microsoft, which presumably would end or be threatened if Google actually acquired the company. But that’s the least interesting part of this rumor.

More interesting to consider is how and where Google might use Digg or its underlying algorithms. For example, Google has been testing an experimental interface that allows for individual and community voting on the relevance of search results. It thus may be that a Digg acquisition would hold broader, general search implications for Google.

Digg itself started life as a “news” site but is angling to become a much broader “recommendations engine” across a range of categories. One might see that integrated into Maps/Local and other areas on Google. Indeed, the company always seems to have several motives and use cases for its acquisitions.

Assuming for a moment the truth of the rumor, Eric Eldon at VentureBeat asks a very interesting question: why doesn’t Google build its own version of Digg? It certainly could. And while Digg is a popular site, it’s hardly the mainstream breakaway success that YouTube had become when Google acquired the latter in October 2006.

In fact, Digg has fallen behind the newer Yahoo Buzz in terms of traffic according to comScore. So it may be something of a perishable asset; Digg itself seems to be acting that way.

There’s more coverage and discussion on Techmeme.

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