Daniel Lyons of Newsweek wrote an interesting article about how Digg is a cautionary tale for Web 2.0 companies:
Digg’s collapse has become a cautionary tale for so-called Web 2.0 companies in Silicon Valley, even the current crop of superstars, like Facebook and Twitter. The basic problem is that these new-media companies don’t really have customers; they have audiences. Starting a company like Digg is less like building a traditional tech company (think Apple or HP) and more like launching a TV show. And perhaps, like TV shows, these companies are ephemeral in nature. People flock in for a while, then get bored and move on. [...]
But Digg’s traffic had begun to slide even before the bad redesign, due to a much larger problem: Twitter. That site started out as a way to let people blast out 140-character posts, but has evolved into a way for people to pass along links to news items they find interesting. Williams insists that Twitter and Digg perform completely different tasks.
That’s true. They are different. But this is how disruption happens in tech. It’s hardly ever about direct competition. Rather, something comes out of left field and provides a new way to do something. There have been plenty of Digg clones, but none of them ever hurt Digg very much. And nobody could have predicted that Twitter would take the place of Digg—not even the guys who created Twitter. And, if history is a guide, Twitter itself will be disrupted by something equally impossible to predict. This is why Facebook’s Mark Zuckerberg said at a conference a few months ago that “the biggest competitor for us is someone we haven’t heard of.”