what are your overheads?

27 Dec, 2008 • posts i've written • No comments

Flipping through my Reader, I came across this article on Valleywag about Digg’s $5 million annual net loss:

BusinessWeek’s Spencer Ante got ahold of Digg’s financial statements. They are frightful, even for a startup. Last year, the company took in $4.8 million and spent $7.6 million, for a loss of $2.8 million. In the first nine months of this year, losses grew almost as fast as revenues: Digg took in $6.4 million and spent $10.4 million, resulting in a $4 million loss. At an annual clip, that’s more than $5 million out the door a year.

And I was reminded of a few lyrics from a song…

They’re turning kids into slaves just to make cheaper sneakers
But what’s the real cost?
Cause the sneakers don’t seem that much cheaper
Why are we still paying so much for sneakers when you got them made by little slave kids?
What’s your overhead?

Think about it.

The article goes on to talk about how Digg is being sheltered by a massive inventory buy from Microsoft, but overall with their funding, the five million dollar annual leak isn’t a critical issue. Sure, whatever.

But I’d love to know how that $7.6 million was spent. Did the makeover in August 2007 really cost that much? Is Kevin Rose flying around the world in a solid gold jet? Are they paying the elite Digg users ‘protection-money’ for not overtaking the site?

Ok ok. Starting a business costs money, sure. But the great white web 2.0 hope, Digg isn’t. With newspapers hemmoraging money, I was hoping a site like Digg, powered solely by the free contributions of the crowd, would be lean and mean. Instead, they’re living like MC Hammer.