Until now, Digg has relied mainly on standard display ad formats to monetize the site. But with the new Digg Ads in the works, the company is following the path of Facebook and other social media properties by developing ads intended to blend seamlessly into the conversational nature of the site.
Similar to sponsored posts on blogs, Digg Ads will appear as other stories posted to the site, with a headline, lead sentence and thumbnail image, but tinted blue and featuring a small "Sponsored" tag in the upper left corner to separate them from organically submitted stories.
While the unit will be fixed on the page above the fold, users will be able to "Digg" -- or vote -- on ads like other stories, with the most popular ads getting more exposure and weaker ones eventually dropping out of the system. The aim is to give marketers instant feedback on ads and help generate social buzz around campaigns while affording notoriously independent-minded Digg users greater control over the ads they see.
"We want to do for advertising what we've done for news," said Bob Buch, Digg's vice president of business development. "Digg is a launching pad for stories. If we can give advertisers a launching pad to blast out campaigns, this is the perfect platform to do that."
Digg is initially beta testing the new ad unit with advertisers including Intel and Electronic Arts, and expects to launch the format with additional marketers across different categories over the next few months. The Digg Ads are part of a wider push that the San Francisco-based company is making to grow revenue and become profitable this year.
Last week, Digg hired Federated Media co-founder Chas Edwards as chief revenue officer to lead its ad efforts, and earlier this year began building a direct sales force under former Yahoo executive Thomas Shin. It has taken over selling custom and premium ad placements on the site from ad partner Microsoft, which still handles Digg's remnant ad space.
The company says Digg.com has grown to 36 million monthly unique visitors globally, with its audience expanding beyond its core demographic of male, tech-centric users to a broader group that is now 41% women and nearly one-third ages 35 to 49. ComScore estimates Digg's U.S. audience much lower, at about 7.9 million in April -- up from 6 million a year ago.
A big question is how the vociferous Digg community will respond to the new ads, which could be viewed as compromising the site's editorial integrity. The most recent backlash by Digg users and others erupted last month after the company launched a toolbar appearing at the top of pages submitted to the site that automatically shortened the URLs of other sites and kept their content in a frame on Digg. The company responded to DiggBar critics in part by giving Digg users the option to turn the feature off.
Based on informal focus-group testing so far, Buch says that user feedback to Digg Ads so far has been positive and that unsponsored news stories about product launches and ad campaigns have already become top-rated picks on the site.
He points to a recent effort for the latest Star Trek film in which a user-submitted story with a movie trailer generated a 5.3% click-through rate compared to a 0.5% rate for a 300 x 250 Star Trek display ad (with trailer) on the home page and 0.1% for a companion leaderboard unit.
"Our users respond well to relevant advertising," said Buch, who noted that users will also be able to comment on Digg Ads as they would ordinary stories. The company believes that level of responsiveness can extend beyond entertainment- or tech-related promotions to more mundane categories such as consumer packaged goods or autos as long as marketers provide compelling content in ads.
If not, at least they can find out quickly, and modify campaigns or pull non-performing ads before wasting more money. Priced on cost-per-click basis, Digg Ads would give advertisers the flexibility to pay according to a campaign's level of success.