Karp’s interviewer is Howard Lindzon, who’s now known as the guy behind StockTwits. Assuming that the interview was taped close to the time it was published, it would have meant that the two men were talking as Karp was raising his first funding round of $750,000, led by Union Square Ventures and Spark Capital.

No need to say anything else:

But the Reddit crew seems to delight in flouting convention, so it also makes sense that there’s a twist to the funding round that’s currently under way.

As TechCrunch reported, the social news site is raising money at a $400 million valuation. But people familiar with the company say Reddit is only raising a fraction of the money it could — most likely about $1 million. And it only wants the cash from certain influential angel investors.

Why not raise more? For starters, because the company doesn’t need it: When Conde Nast and its parent company Advance Publications spun out Reddit as an independent company in 2011, the social site had $20 million in the bank. Since Reddit is able to generate a ton of traffic with a very lean staff, it still has most of that money, around $18 million.

Instead of capital, I’m told that what Reddit CEO Yishan Wong is really looking for is buy-in, and input, from Silicon Valley’s elite investors.

And any angel who does put money in is likely more interested in something other than a financial return. If Reddit figures out a scalable business model, it could well be worth much more than $400 million. But it’s also unlikely to be the ginormous home run that a small investor can get if they bet correctly on a bona fide startup, when their (relatively) modest contribution can buy them a real stake.

I also assume that Wong will be able to find no shortage of wealthy, brainy tech folks willing to write checks and offer advice. I’ve asked Wong for comment, and will update if I get it.

The final death rattle of the Digg we once knew sounded last month, when tech development firm Betaworks purchased the site for a price much lower than the $160 million dollar valuation the company once heralded.

Betaworks’ plan: Rebuild Digg “as a start-up: Low budget, small team, fast cycles.” That included a complete redesign, which launched earlier this month, in hopes that a fresh start will give the site a new lease on Web life.

Though noble in its aim, Betaworks’ first efforts may have crippled the new Digg before it has a chance to leave the starting line.

In order to remedy many of the costly issues that the former Digg team suffered, Betaworks shuttled a number of features once prominent in Digg’s past iterations; the commenting system has been nuked completely, and all of the past articles and activities shared by past users have been wiped clean from the site.

The upside is, we’re left with a clean design and some nifty new sharing features that sync between mobile and desktop devices. The larger issue at hand, however, is that Digg’s existing user base — however dwindling and meager it was — is left with no virtual footprint on the site whatever. Profile history, submissions, comments — all gone from the new Digg.

Philosophically, this cuts to the heart of what a social, community-based sharing site needs in order to thrive. Digg is essentially only as successful as the volume and quality of content that is shared by its users; users who want to talk with each other about the items they’ve submitted, to riff on and build off of each new link in the network. This concept of community building has been crucial to competitor sites like Reddit — which is currently flourishing, trafficwise, with more than two billion pageviews served in the month of December 20122011 alone — which still retains all of the items that the new Digg now lacks.

Take a look at the latest stats from online ad network and data analytics firm Chitika, which show a drastic drop in traffic shortly after July 30, the day Betaworks launched the new version of Digg. Chitika measured hundreds of millions of ad impressions across the Web to determine referral rates from Digg and a handful of its competitors. The chart below relays that information as an index, with the highest level of traffic assigned the value “1.”

As you can see, Digg’s brief spike came in the wee hours between July 31 and Aug. 1, then went on to plummet and not return for the remainder of the week. That’s rough, especially in the early days of a highly publicized redesign, when Digg should be getting the initial traffic that it needs to foster the growth of its shattered community.

Compare it to the traffic index of competitors like Reddit and StumbleUpon, and Digg has a heck of a lot of ground to make up:

Now to be fair, Betaworks says it still has that old trove of user data, and wants to make it available for the old Digg’s patrons to access. “We believe that users own the data they create,” the company says on its Web site. It’s dubbed the Digg Archive, and the company is working on a way to unearth user data from the previous Digg infrastructure so that users can access it. By the end of this month, Betaworks aims to “open up an archive website to help users find, read, and share a history of their submissions, diggs, and comments.”

Problem is, how compelling is it to open what essentially amounts to a museum of old data from a network that truly doesn’t exist anymore? Sure, it’s nice to have access to what I did when I was an active user, but if that information has no bearing on the new site, it becomes less relevant and interesting to me. That’s a distinct disadvantage against a site like Reddit, which relies on a “karma” system, with points distributed amongst users based on their link and comment-submission history. It’s what makes some users stand out among others, and what keeps many coming back to the site regularly.

Will Digg’s new approach find legs over time? There’s no telling, but in a time where Facebook, Twitter and Reddit are far into their maturity, the new Digg sure has its work cut out for it.

The new Digg — bought by John Borthwick’s Betaworks — apparently won’t be like that. Today, the company published screenshots and overviews of its upcoming product overhaul, six weeks into the new ownership.

Digg still had more than 16 million monthly unique visitors when it was bought, but it’s possible that redesigning out in the open may help woo back the critical techies who had deemed Digg irrelevant.

The new Digg is to be heavy on images. In addition to Diggs, the new calibrations of what stories matter will include Facebook posts and retweets, as well as human homepage programming.

The service will also add back some early Digg features such as the “Upcoming” story section, and will get rid of comments (those might be re-added in a later launch, according to today’s blog post).

Digg relaunches for Web, mobile Web and iPhone later this week.

Digg was split into multiple parts for sale earlier this year, including its technical team, patents, servers and the service itself. Betaworks bought the service for what was widely reported as $500,000, but apparently included additional equity consideration.

Though Digg isn’t completely dead yet, it’s in eulogy mode, with a flurry of memories of its culture and influence on media and tech, and postmortems about the road not taken.

This article is going to be a bit less emotional: Let’s talk about that patent portfolio. Indeed, LinkedIn bought Digg’s intellectual property, as was first reported by TechCrunch.

A source familiar with the deal described it in more detail: LinkedIn paid a little less than $3.5 million for one awarded patent and 15 to 20 patent applications.

The awarded patent is on the topic of “content visualization,” and it broadly covers the workings of Digg circa 2007, when the patent was filed.

The patent’s claims include users submitting stories, the system checking for duplicates, and then reordering stories based on user votes, and displaying content in various forms like a list, a “swarm” network visualization of content weighted by votes, and on a map.

That specific interface isn’t necessarily used by LinkedIn, though the company does have a social news component called LinkedIn Today. In fact, LinkedIn just added user voting and a trending story display to Today on Friday.

Besides the short-lived blip of Yahoo-Facebook, so far social Web companies have avoided actually trying to use their intellectual property offensively — though many have been shoring it up. For instance, Facebook did a deal to get the Friendster patents, and Google has bought up patents from start-ups like Wowd and Dealmap.

Named as the Digg patent’s inventors are Digg founder Kevin Rose, as well as Michal Migurski, Shawn Allen and Eric Rodenbeck, who are all partners at Stamen Design. It was awarded in November 2010.

The rest of the Digg patent applications don’t appear to have been published, with the exception of one that’s very close to the awarded patent and also bundles in some other applications about content and event visualization.

That was just one disappointment of several for Mr. Rose, who founded Digg in 2004 and was involved with the company off and on as an executive and director until its very end.

Read the rest of this post on the original site »

Outgoing Digg CEO Matt Williams

Once massive and influential, 7-year-old Digg has receded in recent times, but still has more than 16 million monthly unique visitors. It will be combined with Betaworks’ social news summary email service and app, News.me.

The Wall Street Journal is reporting that the deal was worth just $500,000, a massive decline in value, considering that the company had raised $45 million. Digg CEO Matt Williams disputed that figure, saying “the overall consideration is significantly larger,” and that it was a combination of cash and equity.

Williams, who was brought in nearly two years ago to replace founder Kevin Rose, is going to become an entrepreneur in residence at Andreessen Horowitz. In recent months, he has been working to sell the start-up, and had brokered a deal for its technology team with the Washington Post.

Incoming Digg CEO John Borthwick

Betaworks plans to build “a new version of Digg from the ground up, in the cloud,” Williams said today. The team has been working for the past six months to rethink what Digg should be in 2012, while staying true to its original mission of helping people find great content on the Web, Williams said.

“We are turning Digg back into a start-up. Low budget, small team, fast cycles,” said a Betaworks blog post.

None of the Digg staff is coming along with the sale, except in transitional roles.

Previously, Digg’s tech team — which Williams said amounted to more than half the company — was picked up by the Washington Post, in order to work on its SocialCode subsidiary, which helps marketers buy ads on Facebook and Twitter.

Digg founder Kevin Rose

Williams was appointed CEO in October 2010, on the heels of a redesign that wasn’t technically sound and alienated the Digg community.

In the past year, Digg tried for a return to social Web relevancy with a Facebook Open Graph integration that launched this past December. According to AppData, the Digg app for Facebook currently has nearly one million monthly active users.

But it’s looking pretty close. The Washington Post is in the process of buying/hiring the news aggregator’s technology team, but isn’t purchasing the business itself, according to multiple people familiar with the negotiations. The Post plans to put the new hires to work alongside the people who built the publisher’s Social Reader Facebook app.

The Next Web initially reported on rumors that the publisher was buying Digg, and TechCrunch later reported that the deal was an “acqhire.” Both the Post and Digg declined to comment.

Once the deal closes, Digg won’t shut down, at least not immediately. The site’s remaining management will try to figure out how to take advantage of its brand name and traffic, according to people familiar with the company.

But given the fact that Digg has been looking for a buyer for months, it’s hard to see how they’ll be able to find another home for the remainder of the company.

Then again, it’s been hard to see how Digg would work for some time. The site was once one of Silicon Valley’s hottest Web 2.0 start-ups, and there was a period when lots of Web publishers spent a lot of time trying to figure out how to court Digg’s hordes of users. But that time is long gone (if you’re looking for a social/traffic kingmaker, head to Reddit, which used to be dismissed as a Digg wannabe).

Its current management team — the old guys are long gone, too — has been gamely trying to broaden the site’s appeal by courting mainstream users. But that always seemed like a tough sell.

Given Digg’s track record — which includes a deal to sell to Google that got pretty far down the road before the search giant walked away — you don’t want to write anything about the company with any certainty. But it doesn’t look good.

(Image courtesy of Shutterstock/Rob Byron)

For instance, how did Reddit emerge and thrive over time? How could Digg have grown without alienating its community? Should the world be scared of 4chan? Can I Can Has Cheezburger turn into viable venture-backed businesses? What’s the next big hit?

We might have just the answer to that last question. 9GAG is a fast-growing user-submitted meme site that Silicon Valley investors have recently been humming about — in part because they might actually get a piece of this one early on.

9GAG had 67 million unique visitors in the past month, and more than two billion page views, according to co-founder Ray Chan. That compares favorably with Reddit’s most recent self-reported traffic.

To try to get more of a fair comparison, I asked comScore to pull a chart of global traffic to this group of sites. By unique visitor count, 9GAG surged in the past year to reach the top spot in February. (And, wow, just look at Digg.)

9GAG posts are generally in the style of comic strips, with lots of cute animals and big captions and teen humor, followed by long comment threads of people riffing on the joke. It’s not often clear where the original material was found or created.

Chan and his four co-founders, who are based in Hong Kong, created 9GAG in 2008. It had been doing just fine as a side project, with about 500,000 page views per month — and was a sort of resume-builder for part of the team to be accepted to work on start-up ideas last summer as part of the 500 Startups accelerator.

During the summer program in Mountain View, Calif., the 9GAG team worked on a group photo-sharing app, and then a karaoke site called Singboard, which I somewhat randomly wrote about at the time.

But then, after 500 Startups wrapped up, 9GAG started to grow like crazy. By October, the team decided to kill its other projects and go all-in on 9GAG.

Chan was tight-lipped about 9GAG’s seed funding, saying it wasn’t finalized, but some investors I’ve heard are involved include Freestyle Capital, True Ventures, First Round Capital and Greycroft Partners (that same investor list has been mentioned elsewhere). Chan did say that 9GAG gave 500 Startups equity as thanks for their help with the other discontinued projects last summer.

Chan — who previously worked at a Hong Kong TV station and on a book community start-up called aNobii — said 9GAG is currently profitable using Google AdSense, which is a pretty impressive feat, considering it is paying Amazon Web Services to support its crazy growth.

The U.S. is 9GAG’s largest audience, but it accounts for only 12 percent of total traffic, according to Chan.

Chan thinks 9GAG’s growth reflects its team’s focus on user experience — the site is simple and visual, without lots of annoying ads. 9GAG is also tightly integrated with Facebook; it uses Facebook’s commenting system, it allows users to embed content directly on Facebook, and its actively updated fan page has 2.8 million “Likes.”

9GAG (the name sounds like “making fun” in Cantonese) is much more than a meme site, Chan said. That’s sort of a touchy distinction, because the folks at Reddit and 4chan have criticized 9GAG for stealing their memes.

“We want to become a place where people will go to whenever they want to kill some time and have a laugh,” Chan said. “We want to make the world a happier place.”

Rose’s mobile app incubator Milk yesterday announced it was shutting down its only product, Oink.

Google is not outright buying or “acqhiring” Milk, the sources explicitly said, but Rose and some others from the company have been hired. It’s not clear what will happen to Milk after Rose joins Google.

UPDATE: More people familiar with the deal said the rest of the Milk team is joining Google, with employees netting $1 million to $2 million each. although I’m still trying to nail down the value of the overall transaction. Milk investors are getting their initial investment money back plus a little extra, sources said.

Google declined to comment, and Rose did not reply to multiple requests.

Rose’s first day at Google is to be this Monday, the sources said.

Rose has an avid online following, stemming from his days as a host on TechTV and the long-running podcast “Diggnation.” Though Oink — which was a local recommendations app — may not have succeeded, it was able to hit 150,000 downloads in its first month.

That kind of ongoing fan engagement could be a boon to Google+, which has been criticized for low engagement and tricky user accounting.

Milk had raised funding from a huge group of angel investors as well as Google Ventures (yup), First Round Capital and True Ventures. The total raised was $1.7 million, so I suppose each of them did not have too much skin in the game.

Google had been very close to buying Digg in 2008, but the deal fell apart at the last minute.

Rose has also had an impressive run as an angel investor, putting money into companies like Fab, Zynga, Ngmoco, Foursquare and Twitter.

Update: Google and Rose confirmed the news.

(Image courtesy of Joi Ito)

Let’s be clear on the much-awaited Asian deal that Yahoo and its Asian partners have been working on: While it is certainly still moving forward, once signed, it will not actually officially close until next year.

Yes, that’s right — 2013!

Still, what everyone and his investor is waiting for is the splashy announcement of the agreement, which involves the Silicon Valley Internet giant, China’s Alibaba Group and SoftBank, a large shareholder in Yahoo Japan.

Yahoo leadership has been hoping that could happen before Feb. 24, an important date after which activist shareholder Daniel Loeb could begin to mount a proxy fight against the current board.

And while the definitive agreement — involving the sale of Yahoo’s 33 percent stake in Alibaba and 35 percent stake in Yahoo Japan — has been moving back and forth among the dealmakers, one source said its completion might take a little longer than that, perhaps even into mid-March.

“It is one of the most complicated cross-border transactions in a long time,” said one person close to the situation. “It’s three different languages, three time zones and three companies that have not always seen eye to eye.”

It’s not that the companies don’t have the top talent on the effort. For Yahoo, it is CFO Tim Morse (who most recently also warmed the CEO seat, until Scott Thompson’s recent appointment); for Alibaba, it’s CEO Jack Ma and CFO Joe Tsai; and, for SoftBank, it is top man Masa Son and his top man Ron Fisher.

To make things even more complex, at the same time as the negotiating is going on, the trio also has to pay mind to how the Internal Revenue Service in the U.S. is going to view the whole deal.

As you can see here from a Wall Street Journal chart, it’s a pretty complicated “cash-rich split-off” to avoid taxes.

While the IRS cannot take an application for a “private letter ruling” until it has an actual agreement in hand, and will not issue one on a hypothetical transaction, the agreement still must be crafted so it is most likely to pass muster.

And only then can anyone move on to the many billions of dollars that Yahoo will instruct Alibaba and SoftBank to pay or contribute in kind for the asset part of the arrangement.

As the Journal noted, in more clarity than I ever could: “A key part of satisfying tax-code requirements is that the company shedding its shares get assets, not just cash, in exchange for them. Cash can’t account for more than two-thirds of the transferred value, tax rules say. This restriction was adopted in 2005 to limit misuse of the provision.”

While Yahoo’s execs have met about the various possibilities, it is more considering now than anything else.

And although a lot of names have been bandied about — Weather Channel, WebMD, as well as Glam Media and even Digg — the more likely direction Yahoo will go in will be different, according to many sources.

First, said sources, the key criteria for the purchase will be to diversify revenue streams, a theme Thompson sounded in his first earnings report recently. That could mean more online commerce, perhaps, rather than advertising or media assets.

Second, said sources, international properties might be more valuable to Yahoo than owning more U.S.-based ones, which opens up a range of interesting possibilities.

This could even include some already held by Alibaba, for example, such as garnering a big stake in its publicly-traded Alibaba.com. That property has become a prime candidate for the deal, said several sources, for a number of reasons.

Technically, via Alibaba, Yahoo already owns some of the e-commerce giant, but not directly. Another possibility is to get back the Yahoo China business, also now owned by Alibaba.

Third, U.S. companies that Yahoo might look at could be unusual and even bold. Two names brought up in recent internal meetings, for example, were Netflix (before its stock revived) and Yelp (which is prepping for an IPO, and which Yahoo once tried to buy already).

And if things were not already needlessly complex in fixing its Asia problem, expect a change in the Yahoo board composition, too, as early as this week.

As I previously reported, at least four directors are expected to move on. More to the point, there will also be replacements announced at the same time.

To stave off Loeb and even give him a perceptible win, sources said the company is considering announcing the changes sooner than later, with the hope that fresh new members will placate other shareholders.

Lastly, with Thompson starting to take the reins after a month there, I would also expect he’ll weigh in on some significant restructuring (his word, not mine!) at Yahoo soon enough, too.

Complicated? Sure is! Perplexing even? And how! But until Asian and board resolutions, the real work of fixing Yahoo can’t really begin.

On the outside app developer front, about 20 lucky partners got to participate in the new open graph, starting in September with some default actions: “Read” (e.g. the Washington Post), “watch” (e.g. Netflix) and “listen” (e.g. Spotify). Here’s the list.

Those early partners have benefited hugely from their early participation, which effectively gave them exclusivity over competitors who didn’t make it into the launch.

For instance, Yahoo has had 12 million Facebook sharing opt-ins so far, and today says it’s extending “read” sharing beyond Yahoo News to 26 of its other sites.

Only a few other sites, such as the Huffington Post (“read”) and Yandex (“listen”), have been allowed to launch their new open -graph apps since September.

Today, news-voting site Digg (yes, that’s a “read”) goes live.

The new Digg Social Reader runs off a toolbar rather than as a Facebook “Canvas” app — which means that when you click on a Digg link from Facebook, you go directly to the link, rather than reading it within Facebook. Like other frictionless apps, after you give Digg permission once, it is allowed to continue to send all your reading activities to Facebook until you tell it to stop.

For context: Despite being further behind the curve than it used to be, Digg still has 17 million unique users.

Digg actually has a tumultuous history with toolbars. At the tail end of its glory days, users got extremely angry about the “Diggbar,” which was a Digg-branded iFrame that wrapped Web pages when users visited them via the Digg site. Last year, when Digg founder Kevin Rose took over as CEO (he’s since left the company), his first act was to kill the Diggbar.

In an interview with AllThingsD, Digg VP of Engineering, Ben Folk-Williams, said toolbars aren’t really so bad anymore. The new Digg toolbar is smarter about knowing what page it’s on, and behaving politely. Plus, other services such as StumbleUpon have used toolbars to great effect, without offending users.

The new Digg toolbar has a big fat button that indicates whether social features are on or off. When they’re on, everything you do on Digg gets shared to Facebook.

Compared with the publishers and content hosts that are already using frictionless sharing, Digg is a bit different. As an aggregator, Digg doesn’t host any content — it’s merely a set of pointers to Web pages that its users and algorithms think are interesting.

The Digg Facebook integration is a social curation layer on top of a larger Digg audience curation layer. Folk-Williams said he thinks that’s an asset, because Digg can offer more diversity of sources.

Plus, Folk-Williams said, Digg-style content — top 10 lists, tabloidy headlines, etc. — already seems to be quite popular on open-graph news apps.

As for app developers that are using custom verbs instead of “read,” “watch” or “listen,” some of them are now telling us that they’ve been cleared to launch in early January. Facebook has said such apps are due “in the coming weeks.”

Please see the disclosure about Facebook in my ethics statement.

Gross, who helped create search advertising at GoTo in the late ’90s, has been trying to recreate that magic on the social Web for the past couple of years with the company that’s now named UberMedia. But various products like syndication, monetization and new Twitter clients have all been too close for comfort to Twitter’s own agenda, and Gross has had to twice rename and more times reformulate his business.

Chime.in, which is a division of UberMedia, plans to sell ads on behalf of users’ posts, giving them 50 percent of the revenue, or will allow them to sell their own ads and keep all the revenue.

“I never thought there would be an opportunity as big as keywords,” Gross said in an interview last week. “But social signals are so much stronger than search terms.”

Brands such as E! Entertainment, Universal Pictures, Bravo TV and Disney have agreed to contribute Chime.in pages. All content on the service is public and users aren’t required to use their real names, though they are encouraged to connect to their Facebook and Twitter accounts. The main interface is a personalized social newsfeed of the latest and most popular posts called a “Chimeline.”

Gross planned to debut Chime.in tomorrow at the Web 2.0 Summit in San Francisco, but the iPhone app accidentally launched early, so people are already taking a look. He said the company — which has also built a Web site and Android and BlackBerry apps — is now scrambling to launch today.

Paying for participation in online communities hasn’t historically worked very well. I asked Gross why he thought Chime.in would be any different.

“The biggest example of success is blogs and Google AdSense and Federated Media,” Gross said — where bloggers build up their own audience and then layer on advertising. “Why it hasn’t expanded to communities is because anyone who has tried to build a standalone place missed the social sharing element, so they had to play the SEO game and that doesn’t work.”

Gross argued that the Chime.in community will police itself against gamers and crappy content — the kind of stuff that’s plagued sites like Digg and content farms like Demand Media — because users won’t recommend Chimes they don’t like.

“The breakthrough that’s happened is if you let people have the flexibility to share, they’ll get the message to the right people and do the dirty work for you,” Gross said.

Rose told NetworkEffect that his first app “will be in social and location aware” and should be ready to show in three to four months.

Milk started operations last week and already has a team of six, including co-founder Daniel Burka, who was creative director at Digg and left his gig as director of design at Stewart Butterfield’s Tiny Speck to join Milk. The company is currently raising funding.

Rose told TechCrunch that Milk will be more agile than Digg and that he intends to keep control of the business rather than ceding it to others as he did at Digg.

Rose said he intends for his ideas to be “big” and “audacious,” but who wouldn’t say that?

Six months ago, Rose stepped down as interim CEO of Digg, the company he founded more than six years ago. His recent track record is mixed, with considerable success as an angel investor but a botched and immensely disliked product overhaul at Digg right before he left.

The publisher would continue to own the site, but it’s talking to investors about selling a stake. Sources tell me it is floating a $200 million valuation.

Reddit, which labored under the “Digg-clone” designation for many years, is now a much hotter version of Digg. Last summer, it was doing more than 400 million page views a month; now it’s up to a billion. The free site has made some forays into advertising, but they’ve been very, very cautious.

The theory: Taking Reddit outside of Condé Nast’s corporate structure would make the site that much more valuable, and would give it a better chance to compete for capital, managers and employees alongside the likes of zippy startups like Quora, StackExchange, etc.

The employee issue is particularly acute for Reddit right now, as most of its original team has left the company and the site is now operating with a bare-bones staff. People familiar with Condé Nast’s thinking say the spin-off was contemplated before the most recent round of departures.

“We love our Reddit asset, and it’s a core asset for us, and it’s getting more valuable every day,” said Steve Newhouse, who runs digital operations for  Advance Publications, Condé’s parent company.

Newhouse, who wouldn’t offer any other comment on Reddit, is also overseeing M&A for Advance. Last year he hired Yahoo dealmaker Andrew Siegel to kickstart Advance’s efforts, and sold off some stock Advance held in Discovery Communications to give Siegel a $500 million starter fund.

[Update: Reddit employee Jeremy Edberg says, among other things, that my report is a "complete fabrication". I stand by my story.]

Exactly what it looks like today (well, with some future improvements), according to CEO Matt Williams, who said that Rose–who founded Digg in 2004–has only acted as an adviser since Williams replaced him as CEO six months ago. Williams disputed reports that Rose had recently resigned from Digg to start a new company, saying Rose has been gone all along.

In an interview, Williams said his team has been in “fire-fighting mode” since he joined six months ago, paying off in 20 percent more user-contributed Diggs, 20 percent more time on site and 50 percent more comments since the end of 2010.

Williams also disclosed that Digg VP of Product and Engineering Keval Desai, a major hire who had joined the company from Google in January 2010, is on the way out. Desai will be replaced by Ben Folk-Williams, who was most recently at Vast. The two are currently both working at Digg in a transitional stage.

Williams has essentially spent his tenure digging himself out of a failed product revamp that left Digg unstable and angered users. That long-delayed, and then ultimately rushed-out launch–known as V4–had also contributed to the departure of Digg’s original CEO, Jay Adelson. Digg has essentially only added back old features, listened to its users and restored stability, with no new features to speak of since Williams joined.

“There have been a lot of comments about Digg being dead or Digg being yesterday’s news and the reality is actually quite different,” Williams said. “We hit a wall six months ago but we’re still a top Web site and the user base is quite vibrant. Users love the direction we’re heading and love what we’re doing.”

Digg now intends to focus on community and personalized news products, said Williams. He said that Digg has never been profitable in the past, but it should be cash-flow positive this year, and has enough money in the bank to last “well into 2012.”

Part of what’s next could include extending Digg’s social ads product to other sites around the Web. Digg’s homemade advertising product, in which user voting changes the price of an ad, now accounts for more revenue than banner ads, said Williams.

After much turnover and multiple rounds of layoffs, Digg now employs about 40 people at its long-occupied office in the Potrero Hill district of San Francisco. The employee with the longest tenure is now community manager Dan Huard, said Williams, who has been at Digg 5.5 years.

TechCrunch reported today that he had resigned and was closing a $1 million round in funding for the venture.

But, so far, no one’s saying what it is.

Let’s hope it turns out better than Digg has.

Because although Rose has had luck as a Web celebrity, calling yourself a “Digg founder” ain’t what it used to be, especially since his stint last year as interim CEO presided over a hugely unpopular launch that the company has been extracting itself from ever since.

Rose said he currently serves on Digg’s board. Sources said he didn’t actually “resign” from Digg, though, but rather pulled back after handing over the CEO role to outside hire Matt Williams. Last year, Rose called serving as interim Digg CEO a “nightmare” that “I would never wish on my worst enemy.”

While Rose would clearly rather be in the spotlight for his own success, he has been able to string together an impressive portfolio for an angel investor, with companies like Ngmoco, Twitter and Zynga. In addition to continuing to appear on Diggnation, Rose also recently launched a video show and newsletter called Foundation.

Update: Williams commented,

When I took over as CEO of Digg 6 months ago, Kevin’s role changed to that of Founder and Board member and nothing has changed since then. Thanks for all the positive comments we’ve been seeing, we’re excited about our direction as well.

The round is from Accel Partners, August Capital, DAG Ventures, First Round Capital and Sherpalo Ventures.

StumbleUpon is on its second run as a start-up. The company raised $1.5 million in angel funding in 2005 and was bought by eBay in 2007 for $75 million in cash. In April 2009 it spun out of eBay with its founders and most of that list of investors providing Series A funding. This new round is being counted as a Series B.

StumbleUpon–which helps users serendipitously find new sites, photos and videos based on recommendations by friends and other users–has become a major traffic provider for blogs. Recent stats put out by the publisher tool provider Lijit had StumbleUpon delivering almost as much traffic as Facebook to sites within its network, and far more than Digg, Twitter and Reddit.

StumbleUpon is now up to 14 million registered users and makes 800 million content recommendations per month.

Yahoo’s Luke Beatty said he is not worried.

“We welcome the change,” he insisted about Google taking aim last Friday at so-called “content farms,” producers of low-quality content that spam up the Web and the search giant’s results. “And we endorse what Google is doing 100 percent.”

That’s ironic, given among those allegedly hit hardest by changing of its famous algorithm–based on early, and perhaps questionable, surveys–is Yahoo’s Associated Content.

But, if true, and traffic at Associated Content–which the Silicon Valley Internet giant bought for $90 million last May–is indeed badly hurt, it’s obviously going to be a problem for Yahoo, which relies on advertising revenue as its core business.

A quick poll by Sistrix, a search engine optimization firm, using one million keywords before and after Google’s changes, showed that Associated Content’s “visibility index”– including keyword and ranking positions ranking and clickthrough rate–was down 93 percent.

So yesterday, Beatty, who founded Associated Content and now works at Yahoo, dialed up BoomTown to talk about what the Google shift will mean to Yahoo.

First off in the wide-ranging interview, he noted, “everything on the Web is changing all the time,” noting that Associated Content used to rely more on the now weakened Digg and RSS for its traffic and distribution.

“Obviously, that has changed and we have still managed to grow,” he said.

Beatty said it is still not clear that the new tweaks in search criteria at Google would mean for Associated Content’s offerings–coming from 400,000 contributors of all kinds.

“Our data will not be reconciled for weeks…but some will be up and some will be down,” he said, adding the overall, “I suspect it will be down, although it’s not accurate by any means in the numbers released so far, since there is no way you can know this early.”

Still, it’s obvious that Google’s latest move has not been not good for Associated Content, although Beatty noted that the Silicon Valley search king is no longer the main source of traffic for Associated Content material.

Instead, that would be the owned-and-operated sites of Yahoo, most of all, and–increasingly–social networking sites such as Facebook.

“When we sold the company, we know that sites of Yahoo itself would be the biggest driver of our growth and that was the plan,” said Beatty. “And, though smaller, social means of distribution are clearly the way people are now finding our content.”

In an email later, Beatty underscored this point:

“Search traffic is not our focus within Yahoo–it hasn’t been for 10
months…traffic sources have changed endlessly over that last six years…search is one, albeit an important one and clearly, [but] now it too is changing and we see the future of our content distribution coming from O&O properties and social networks, as much as anything.”

Still, Beatty said Associated Content will adapt as long as Google does not make its tweaks on a network basis and rather than on a site basis. (Interestingly, that would presumably include Google’s own–and often spammish–Blogger property, which is fueled by its powerful AdSense engine.)

“It appears that changes have been made on an asset-by-asset basis
is good–networkwide cramdown would be inappropriate and uneducated,” he said.

Still, the best way to fight the Google initiative is by delivering higher quality content, which Beatty said was being done at the company via a series of ongoing measures to improve overall submissions.

Those include a Yahoo style guide for content creators, a two-tiered human editor review process, analytical analysis, a featured contributor program and, interesting, an online tutorial process called the Yahoo Contributor Network.

It’s not exactly Harvard University, of course, but Beatty said there is more to come.

“We are committed to supporting and helping our contributors navigate through this and every other change in the crowdsourced content economy,” he said. “We want the best article to get more traffic.”

Of course, with Google’s doubtlessly continuing changes in its criteria for what good content is, presumably, that won’t be Yahoo’s to decide.

Now, five months into the job, Williams is finding a voice of his own, separate from Digg founder Kevin Rose’s, and trying it out on the Digg community; the longtime veteran of Amazon recently participated in a well-received Digg Dialogg video interview, posted on Tuesday, to answer user questions. (It’s viewable here).

“There was a launch that was in violent disagreement with what our community expected out of the Web site,” Williams told Leo Laporte, who facilitated the interview based on Digg users’ questions. “It’s truly a tragedy of the ages, to some extent.”

But Digg is still a “very vibrant Web site,” with close to 20 million monthly unique visitors, Williams said, and the opportunity to hone a focus on social news that other companies may not have.

(Plus, despite layoffs, a perceived lack of relevancy relative to other social start-ups and multiple leadership changes, Digg still has plenty of money in the bank.)

“It is our top priority to rejuvenate the community,” Williams said.

Digg’s latest launch, called V4, was seen by many as a move to devalue the site’s homegrown community. V4 was the most significant in a string of product changes that took power away from the small body of users that set the agenda for the news site and gave a stronger voice to publishers and Digg’s own curators. And V4 was also an overdue, complete technology overhaul that left out many much-loved features.

In the Laporte interview, Williams quickly tackled precise details about previous features the Digg community wants reinstalled, noting, for instance, that the site has already brought back the “bury” button, allowing users to counteract other users’ votes on submitted stories. He said Digg is also planning future features such as a honing of its news-ranking algorithms for slower weekend traffic, when less-worthy stories may make it to the top.

Beyond those tweaks, Digg will make large-scale efforts to become more personalized, said Williams, and to create communities around specific topics. That’s not necessarily something that the old-time crowd will love, but it may make the site more useful for a broader audience.

Williams encouraged users not just to visit the site, but to comment on and vote up stories with Diggs; those participatory behaviors have decreased as a portion of overall traffic since the launch of V4, he said.

Being the voice of Digg is no small task, and it’s not just because of the company’s hypercritical user base. Digg has long been associated with the founding presence of TV and online video host Kevin Rose. And until Williams joined, Rose had been interim CEO after longtime leader Jay Adelson was pushed out of the company in April. Now Rose is occupied with his many angel investments, a new video show and a newsletter called “Foundation.”

Digg users were uncharacteristically positive in the comments section of the Williams interview entry. (The friendly tone makes me wonder if the old crowd has indeed high-tailed it somewhere else!) “Digg is in good hands,” said one. “I must say that Digg is doing a fantastic job listening to the community and implementing new features,” said another. One user even acknowledged, “I realize changes take time to implement.”

With higher-resolution cameras in our smartphones, everyone seemed to be adding social photo posting to their apps.

Hi-res photos hit Facebook, pictures came to Foursquare, and phones filled with apps to crop, stretch, filter, sketch and generally punch up our often marginal photography.

So, in honor of a big year of sharing photos with friends, here is a quick gallery of shots from the holidays, gathered with care from the walls and feeds of a few of tech’s most social shutterbugs.