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Digg sold for scrap

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Kai Ryssdal: The technology industry is full of Cinderella stories: Startups like Instagram selling for a billion dollars; Facebook, well, Facebook.

But there are plenty of companies that misread the moment and missed their chance. Groupon, anyone? Or Digg, one of the earliest social media sites. What’s left of Digg is said to have sold yesterday for $500,000, maybe a little more.

Nice, but nowhere near the hundreds of millions it used to be worth. But how do you know when it’s your moment?

Marketplace’s Queena Kim explains when it comes to social media, at least, timing really is everything.

Queena Kim: When Digg launched in 2004, it was a startup darling. It let users post links to their favorite news and websites. Then their friends could vote the link up-or-down. In its heyday, the site had 14 million visitors — and a line of offers. Google reportedly put $200 million on the table in 2008. But no deal was ever done. So that $500,000 selling price has got to hurt. But could Digg have known?

Robert Hendrshott: There’s no balloon that goes off, or siren that sounds.

Robert Hendershott teaches entreprenurship at Santa Clara University. He says says despite that caveat, there are signs. One company that read them right was MySpace, which sold itself to NewsCorp in for $580 million in 2005. Then it tanked. News Corp eventually sold it for just $36 million. Hendershott says Myspace probably looked into the rear view mirror and saw Facebook coming, quickly. And so investors made their exit.

Hendershot: Facebook was clearly going to surpass them and once you see that, now is the time to consider getting out of this investment.

But things aren’t always that clear. Toby Stuart, teaches entrepreneurship at U.C. Berkeley’s Business school. He says the shelf life of social media companies is determined by their audience and they can be fickle.

Toby Stuart: People move very, very quickly off of these platforms because for most of them, there are very few what we call switching costs.

The switching cost? Typing in a new url into your browser and leaving that old site behind.

In San Francisco, I’m Queena Kim for Marketplace.

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