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1.What lessons does Digg’s failure have for entrepreneurs who are studying entering the social media industry? Answer: The main lessons are to avoid the things that sunk Digg. First, it’s important to remain as intuitive and easy-to-use as competitors. Part of Digg’s downfall was that it didn’t react to the ease-of-functionality people found in Facebook and Twitter. Second, make sure the site is up almost 100 percent of the time. Also, be careful to remove features from your site, because the features you use may be someone’s favorites. Digg also failed on this dimension. Finally, make sure the social contract you enter into with your users is authentic and remains. People became disillusioned with Digg when it claimed it was democratizing the Web only to learn that it was easy to game the system. 2.Would you characterize the “Rivalry Among Existing Firms” in the industry Digg competes in as high, moderate, or low? To what degree was Digg able to effectively diminish or suppress the negative effects of the rivalry it experienced? What, if anything, should Digg have done differently in this area? Answer: Most students will say the “rivalry among existing firms” in the social network industry is high. It’s not particularly difficult or expensive to launch a social network—thus the high number of new entrants. Digg was not effective in diminishing or suppressing the negative effects of the rivalry it experienced. It should have responded much faster to the growing competition from Facebook, Twitter, and others.
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