Google pulls out of Digg deal

July 30, 2008

It has been reported in the news today that Google has pulled out of its £100m bid to buy social-news site Digg despite five months of negotiations. In the last couple of years we’ve seen some high value and high profile sales; YouTube, Bebo and LastFM. Is this the end? Has the credit crunch finally burst the web 2.0 bubble?

The short answer is no (probably). The failure of the Digg deal was more down to there not being a good fit rather than jitters concerning the current economic climate. This is backed up by our experience on the ground. There is still an appetite for online and new media businesses especially those with proven and recurring revenues. Also, given that the property and stock market are such unattractive investments at the moment investors are looking at putting their money into high growth online and tech companies.

Having said this, it is obvious that purchasers and investors are being much more cautious; taking their time, asking for protections and guarantees and are not willing to pay so much. Both Google and Ebay have struggled to justify the price they paid for YouTube and SKYPE. The net effect of this is that it is probably the end of the billion dollar sale but we are still going to see continued activity, just on a smaller scale.

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