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Having spent a major part of the week sitting on a beach, practically disconnected to the incessant drumbeat of the news cycle, it was hardly surprising that I missed yesterday’s hoopla about Digg (or whatever was left of it) being acquired by Betaworks for around $500,000 and some equity. Betaworks is going to use the brand (and its traffic) to resuscitate its News.me app. Earlier, The Washington Post acquired some of the talent from Digg for about $12 million.

Failure, throughout ages, has been a reason for a public spectacle. So why should it be any different when it comes to Digg, one of the more iconic web companies since the dot-com bust at the turn of the century? It is hardly a surprise that much of the commentary around Digg has focused on the remarkable failure of the company.

A lot of attention has been devoted to Digg’s bad decisions – not selling out to Google, bad technology choices, aping other social networks or essentially misreading & mistreating their community. I don’t disagree with any (or all) of those arguments because they are right. Even back in early 2009, it was quite evident that the changing nature of the web was going to spell the end of Digg as we know it.

If the yardstick of success is making money for the founders, employees and the investors, then Digg will go down in the annals of web history as a colossal failure. However, if your yardstick of success is defined by a company or a product being a change agent and an instigator, then Digg was a smashing success. It is maybe a failed new-media company, but it is also a pioneer that changed the media landscape not by creating anything, but instead by putting the people in charge of what was media. Like Flickr, it was a company that opened our eyes to the potential of the social web. It also reminded us that links are and will always be the atomic unit of the web.

Talking about a revolution

Having spent more than a decade blogging and nearly twice as much time writing about technology, I have observed some of the well-known names in the industry make their moves. No surprise, I got a courtside view into Digg and the people who made the company. I first met Kevin Rose, Digg’s founder, when he worked for Tech.tv and I worked for Red Herring. Both companies were around the corner from each other. I met Kevin’s partner in Digg, Jay Adelson, when he was busy trying to grow Equinix. Later, Kevin’s other startup, Revision 3, produced and distributed The GigaOM Show.

These social connections allowed me to get to know a lot of people who worked at Digg. And all I can say is that during Digg’s heydays — 2007 to 2009 — the company had attracted some seriously smart people into its fold. Designers, engineers, growth hackers, community experts — Digg was for a while one of the coolest companies to work for as long as you were young, nerdy and totally obsessed about Digg. They had little or no regard for the legacy of media or the web and tried to keep inventing things they thought would be cool.

Later, that spirit of constant reinvention would come in handy for many of these kids — and they were really kids — in the future. I just did a back-of-the-envelope count and ended up with more than a dozen startups that have been started by ex-Diggers. Here is a sampling of names I came across:

FantasyBook (acquired by Citizen Sports), Well.io, SimpleGeo (acquired by UrbanAirship), Sprint.ly, Toodoo, Circa, Fflick (acquired by YouTube/Google), Milk (acquired by Google), Fanvibe (acquired by beRecruited), ShindigSF, mojoLive, Kiip, Frugalo (acquired by Twitvid), Toobla (shutdown) and a bunch of others that are still in stealthmode. Others ex-Diggers have played big role at newer companies. Eventbrite team is chock full of ex-Diggers such as Ben Standefer. Matt Van Horn and Daniel Trinh are at Path, and Chas Edwards is now working for Luminate. The list goes on and on. (See disclosure below)

The Mothership is calling.

In a discussion thread over on Facebook, Standefer pointed out that between 2007 and 2009, Digg moved what he calls “60 awesome engineers and startup people to SF from all across the country. A lot of those people wouldn’t be out here founding startups if Digg never moved them out here from wherever they used to live. ”

Joe Stump, co-founder of SimpleGeo and now Sprint.ly wrote in an e-mail that “Digg was comprised mostly of people who were recruited from outside of the Valley into what was, at the time, beloved by the media, users, and internet.” He recruited engineers who moved from Michigan, Illinois, Washington.

“Our first engineer was from Nova Scotia, Eli (our second) lived in Maryland,” Stump said. “I think a lot of the magic, when you look back at who our early hires were (Matt Van Horn at age 22, Brian Wong at age 18, Jeff Hodsdon at 19, Danny Trinh at 19) you’ll find a few common traits.”

Many of these kids were fanboys who loved Digg and were essentially no different than the community there. Stump pointed out that the company took big gambles on these young kids who basically were ecstatic to be at Digg and very hungry to prove that they were worth the shot. Stump argues that he didn’t have the credentials of being a Lead Architect but the company gambled on him. It created a fierce desire to not screw up. “I think this culture of taking chances on young talent and, subsequently, giving them room to grow was an amazing thing,” Stump said.

We are the media

“For me, the key driving force at Digg was a sense of mission,” said Daniel Burka, a well-known designer who moved to San Francisco from Canada. Burka, who worked at Digg and later co-founded Milk Studios with Rose, pointed out that “during Digg’s first few years, I genuinely felt that we were pushing the boundaries of media, democracy, and technology.”

It is easy to forget that Digg played a big role in making media social. Digg put “ME” in media. “It’s easy to forget now, but media was incredibly unidirectional in the pre-web-two-oh era,” Burka wrote to me in an email. “Digg was one of the first powerful forums for participatory media, whether that was the ability determine what constituted the news of the day or to comment on any story told anywhere on the web. I’m sure you can hear the passion in my voice as I’m writing this. They were heady days… and, despite obvious shortcomings over time, Digg honestly did shift the media landscape in important ways.” Digg Spy and Digg Stack were too minor examples of how Digg tried to deal with what was essentially a precursor to today’s information deluge.

Back in the early part of this century, voting on content was a new way of making the web useful. Digging became part of web behavior and since then we have seen Facebook (likes), Twitter (retweets) and Google (+1) also incorporate that same behavior into their products. Tumblr has reblog and Pinterest has pins. And pretty much every consumer app now uses voting as a tool for quick engagement. Digg’s patents around voting were useful enough for LinkedIn to pay between $3.75 million to $4 million for them according to published reports.

Digg became such a driver of traffic to websites that it prompted even the most haloed brands — The New York Times, for example — to add “Digg” voting buttons on their stories. Today, it is common place to see Twitter, Facebook, Google and The Fancy chicklets all over the web. Digg, was the anabolic steroid of the web — tech blogs (including ourselves), Huffington Post-style publications, and others owed their rise to the top to Digg.

Whether media doyens want to admit it or not, Digg changed how a lot of media was created and shared. Top ten lists were popular on Digg and generated a lot of traffic (and by extension were good for low CPM advertising) so even the most established media companies embraced that. Headlines were crafted to get the highest amount of attention and votes on Digg.

Digg is gone, but it will always remain with us. In its defeat, it turned out to be a victor.

Disclosure: True Ventures, where I am a venture partner, is an investor in Kiip and UrbanAirship and was an investor in Milk Studios. True is also an investor in GigaOM.