It costs Digg about 5 cents per visitor. Where is that going? Seems excessive for bandwith + servers. The content is user generated, I cannot believe that they are spending much of that $14m on development or administration.
There's no reason the site couldn't be run by five people.
Yes, Digg could probably have bootstrapped. But they didn't, they raised money, and once they did that, the money that the VCs gave them was meant to invest, which is guaranteed to mean that the company shows a loss.
PS: Every dollar you spend that's not supported by revenue should get the company more than one dollar in profit.
Which begs the question: why exactly did they need 40mm in funding?
2. Put up banner advertising.
3. ???
4. Profit
Also, digg's design is poor. It has too much space spent on borders. With a cleaner interface, it would have more add space to monetize.
