Will Google Gobble Up Digg?

AOL has Propeller, Yahoo has Buzz and Google has Digg? Well, not quite yet, but rumors are flying that the search giant has signed a letter of intent with Digg and that both sides are very close to a deal with an estimated $200 million price tag. But this is not the first time we've heard of such a rumor. In fact, Digg CEO Jay Adelson told The New York Times in February that if he commented every time this rumor came up, he'd never get anything else done.

A deal that has Google buying Digg presents one major question to me though: why such a low price? Google nabbed YouTube for $1.65 billion two years ago and the company just wrapped up its deal for DoubleClick earlier this year for $3.1 billion. Digg does not have the revenue capability of an ad delivery platform like DoubleClick, but Digg is a pioneer in social news ranking and is extremely popular. Of course, the software behind Digg is not that complicated and Google, if it bought Digg, would probably improve Digg's engineering. But still, I have to say, just $200 million? I suppose with the economy in a slump it really is a buyer's market.

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