Seemingly poised for battle over yet another technology acquisition, Google and Microsoft may be looking to buy social news site Digg. Reports say two unidentified media companies are discussing the acquisition. Digg, which has been for sale for some months, is working with Allen & Co., an investment bank, to find potential buyers.
The bidding war is said to be in full swing. Digg’s price is between $400 million and $225 million, a far cry from the billions Microsoft and Google bid in past acquisition battles. Digg sought $300 million last year, but is reportedly willing to take less.
Is Digg Worth the Battle?
Microsoft may have favor with Digg. Redmond has an advertising deal with the news site and a relationship with MSNBC, one of the most popular sites on the Web. Most of Digg’s revenue comes through its relationship with Microsoft, but the founder could decide it would do better with Google.
Could Google be bidding against Microsoft in a sort of pseudo sibling rivalry? It’s possible, according to Greg Sterling, principal analyst at Sterling Market Intelligence. “Google could be trying to take the ad relationship from Microsoft,” he said. “That would seem to be a lot of money to spend, but I haven’t seen any of the ad rates or performance at Digg.”
Although Google has tried to become more sociable, the search king does not have a strong social-networking presence in the traditional sense, Sterling said. Google pushes the Orkut card, but Orkut is not visible in the U.S. or Western Europe. Sterling finds Google’s interest in Digg “curious.”
“I suppose Digg would offer Google a way to get a social media property that’s fairly visible and popular and also have more ad inventory,” Sterling noted. “But Google said in its last quarterly earnings call that the response rates to ads on…