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"Competitor Reddit.com started much later than Digg, and never really had a chance to catch up — until now"

That's not really true. Reddit started less than six months later.

And has more traffic than Digg already...
So first of all, I see alexa as pretty suspect. I have some doubts about this overall, although I would not be surprised if digg traffic had steadily declined over the last 3 years (testament to the not-so-amazing bizdev team there). But mostly I'd guess Kevin misspoke.
And it is noticeable in the constant decrease in quality of both submissions and comments. Just compare the scribb.ly discussion here to the one on reddit: http://www.reddit.com/r/programming/comments/d8ph4/building_...

Granted, one can circumvent a lot of nonsense on reddit by carefully selecting and managing subreddit subscriptions but in the end I find myself unsubscribing from more and more reddits over time.

Reddit saw an uptick of about 30 percent in “self-serve” ad sales this week

Their graph shows an uptick, but only for the first part of the week - http://www.reddit.com/promoted/graph

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I feel like there's a lesson for the companies operating within the social web here somewhere. I don't know, something like "if your business model is based on making your users happy, don't make crassly commercial usability shifts that make them really unhappy." Can't quite put my finger on it, though.
I don't think you even need to add the "commercial usability" qualifier in there. Any kind of change (be it usability, UI, search, functionality, etc.) will be disliked by some portion of the community. Make the change big enough that you flip the community on its head and you'll dump your ad-clickers overboard.
It's not usability that has turned people off, it's the change in underlying functionality. It's no longer a community site.

People can get used to UI changes, even radical ones. But fundamentally changing the way people interact with a site (and the value of that interaction) will guarantee that people will leave in droves.

I liked the base ideas of digg v4, but the current site's layout just isn't on par with either digg v3 or current reddit. I like the idea of subscribing to feeds and knowing my friend's votes on the topics we follow together - a kind of social google reader. They still have lots of work to do...

Also, the site was down for most of the past week... hard to get traffic when your site is down. I don't think this migration could have gone worse for them.

I thought, "this whole v4 thing has gotta be bs" originally. Yet, I'm generally just on HN, ./ and reddit, so I don't notice.

Then yesterday I went to Digg to submit a link, and I was shocked. This wasn't a minor UI tweak that got users upset (like Facebook does monthly), but it seemed to flip the site on its head completely. I can see why users were upset.

I agree, the ideas were good- but good for another site, not to take a community a flip it upside down.

I wonder if Digg could have sold the relaunch off as a "failed premium service for users" and treat the power users really well. Obviously, everyone gets pissed off and Digg backs down and opens if for "everyone" and refunds any paid-in fees.
Isn't all this analysis premature?

I haven't followed the story closely (not being a user of Digg, and barely visiting Reddit), but since Digg's change happened a week ago, I think there's bound to be a lot of fluctuations before we see who's "really" winning.

From the official reddit blog: "So I guess the lesson is, there's no reason for redditors to waste comment space picking on Digg. They do their thing, we do ours, Google News and the New York Times do theirs."[1]

Wanted to call bs on this when it came out, but didn't have the proof. Take that, niceties.

[1]http://blog.reddit.com/2010/07/into-lions-den.html

The main thing I like about reddit is that the pages (like Hacker News) load very very quickly.

Very very important to me.

Odd, because the one thing that riles me most about reddit is its slow pageloads. It's often slow enough to make me pause to consider whether I really want to load the comments (for instance).
I think reddit is an insular community of jerk types. Prediction: an influx of newbs will be rebuffed.
I've found that reddit is a pretty disgusting, hateful place. I refuse to go there anymore.
I left reddit for Hacker News as soon as I discovered it. Aside from the excessive Paul Graham worship (which I suppose is excusable considering this is a Y Combinator experiment), it is a veritable oasis of reasonable, rational people interested in intellectually-stimulating topics.

I found reddit's obsession with trivialities and knee-jerk vitriol against capitalism in general to be disgusting.