The obvious goal of the blog post is to advertise Digg's available jobs to prospective engineers. But in so doing, Adelson's alerting everyone to Digg's ever-expanding payroll expense — without talking up where the money is coming from. Digg has a sweetheart advertising deal with Microsoft, which sells ads for the site — but it hasn't found a revenue model of its own.

And Digg has a management problem which will only get more obvious as the company swells. Adelson, who commutes to Digg's San Francisco headquarters from his home in upstate New York, has admitted that he's not as committed to the company as he could be, having been burnt at a previous startup, Equinix. Founder Kevin Rose, who still commands considerable respect among Digg's contentious users, has made it plain he's not interested in running a big company and taking it public. It's hard to picture Rose and Adelson staying if Digg is sincere about getting big.

Rule No. 1: Convince the video's participants that the end product will be less embarrassing if they don't worry about being embarrassed while they make it. Get your people to either commit themselves fully to the project, or stay out of the way. Vimeo's companywide lip synch of Harvey Danger's "Flagpole Sitta" wouldn't work nearly so well if the girl listening to her iPod at the beginning didn't keep such a straight face. Know what else doesn't hurt? Actually memorizing the lyrics.

Rule No. 2: Get the heavies involved. Digg's "Groove Is In The Heart" from Mark Trammell wouldn't be nearly so worth watching if CEO Jay Adelson didn't start rapping two minutes in. Tocquigny's video featured only interns, making it seem like the real executives didn't take the PR project seriously. What kind of example does that set for the monkey-see-monkey-do younguns?

Rule No. 3: Plan meticulously and practice. Here's "L'amour a la française" from AOL France. Note how precisely the performers hit their marks. Note how cleverly new singers appear on the screen. That's dedication, people! (It probably didn't hurt that the most of these people knew they were about to be laid off and probably spent most of their remaining time working on this video.)

Rule No. 4: Learn to edit. Facebook code monkeys — here dressed as White Ninjas for the company's annual games day festivities — aren't actually supersneaky ninjas; that they appear as such comes from careful editing. A hint: Editing usually takes longer than filming.

Rule No. 5: Feature the most attractive coworkers prominently. Sure, a companywide video will probably include everyone from the company. But give the longest shots to the most attractive office-workers, like the girl listening to the iPod at the beginning of the Vimeo video or the swirling blonde in the middle of the video below made by Leonardo Dalessandri's production company, "Tambureddu." Also, be a little cynical and use a frame from one of those shots for the clips' still frame, which will appear in searches and embedded placements in blogs.

Shortly thereafter, reearsh firm Hitwise ran numbers which showed that Digg would be inconsequential for Google's traffic, only the 13th largest Web property, well behind Google News. Coincidence? Perhaps, but they can't have been helpful for Digg's negotiations.

One other sign that the deal has been going nowhere: Digg has been interviewing for a head of PR. That's a position they wouldn't fill if they were close to a sale. That said, we hear Digg board member Brett Bullington, who helped sell JotSpot to Google in 2006, has been pushing to keep negotiations alive.

So are things on? Are they off? Never say never in deals. But even Digg CEO Jay Adelson acknowledged this week, at a meetup with Digg users in Chicago, that his company has been too prone to leaks during negotiations. Could he be getting a taste of the same from the Google side? That's a theory I dig.

(Photo of Rose by Brian Solis/Bub.blicio.us)

Adelson said the move will open Digg up to new verticals and make it possible for stories that wouldn’t make the cut on the main Digg site to find an audience. Users will be able to control the threshold for submitted articles being promoted to the front page of these.

What struck me about Hansell's piece was the use of a file photo that features a wildly grinning and unbelievably baby-faced Adelson — with professionally trimmed hair, no less! Looks a little too much like a certain viral movie marketing campaign to be a coincidence. Is the gray lady secretly synergizing with News Corp. on the latest Dark Knight release and subtly Joker-izing Adelson?

What's interesting is the timing. A source familiar with the talks says Google and Digg reached an agreement last month; it's not clear whether the offer was verbal or a formal termsheet. So why the delay? One possibility: Digg may have been exploring whether it could hire a rock-star CEO and raise more money. Adelson has long been flying cross-country, twice a month, to San Francisco from his upstate New York home, and privately complains about the commute to friends. But so far, I've heard nothing about Digg raising a new venture-capital round, or Adelson making way for a higher-profile hire.

Of Digg's possible acquirers, Google is the company's most natural home — despite Digg having a multiyear advertising contract with Microsoft. Google desperately wants to get a handle on social networking; it has struggled to sell ads profitably on News Corp.'s MySpace. More importantly, Digg could help Google improve the relevancy of its search results, especially with the news articles Digg readers vote on and discuss so vociferously. That might be worth more to Google than any ads it might manage to sell on the site.

The deal may not happen. Insiders are already mystified by its lack of progress since word first started spreading last month. As Sarah Lacy revealed in Once You're Lucky, Twice You're Good, Digg has held a series of deal discussions that never came to fruition. That history makes it hard to take any new Digg-sale rumor seriously. But we hear these discussions are close enough to take seriously. Cupcakes, anyone?

(Photo of Rose by Brian Solis/Bub.blicio.us; cupcakes by a_cooper)

(Photos by NewYorkInsider and NYFoundersClub)

Photos by Randal Alan Smith

Digg Dubb: Groove Is In The Heart from Trammell on Vimeo.

Three possibilities:

• Incompetence — the site is actually down.
  
• Stupidity and laziness — reputable companies don't take their entire site down in the middle of the day without a damn good reason. Those reasons include going out of business, major security failures and essential must-fix-right-this-second bug fixes. Maybe Digg's engineers don't want to work at 3 A.M., but that's what they get paid for. It's generally a good idea to not inconvenience your customers. Intentionally taking your site down for a mere software update at peak traffic time? Dumb.
  
• Brilliance — Kevin Rose and Jay Adelson know that the tech press will write about it, or at least notice that Digg is down. I've gotten three IMs about it already this morning. It could be a stunt to generate publicity, Steve Jobs style. Every Tuesday, Apple fanboys gather around store.apple.com to see if the site gets taken offline — it's a sign that new products are coming imminently.

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Sabala, who started at Digg on February 6 as community manager and marketing director, is a SXSW veteran. (You can tell because she calls it "South By.") She was set on the idea of a party at the festival, but by Friday, she and the rest of Digg had decided it was a nonstarter. The next Monday, though, she gave it another try. A call to a Napa winery landed a sponsor for wine. A call to a contact at PureVolume secured the club for Tuesday night. With that, Sabala had a party that bridged SXSW Interactive's last day and the SXSW Music's first.

A few blocks away at Six Lounge, Revision3 was also bridging music and the Web, with a live debut of "Rock Band," Randi Jayne Zuckerberg and David Prager's homage to the guitar-wielding videogame at a party hosted by Rana Sobhany. Kevin Rose ruled Austin last night — he also cofounded Revision3.

Prager, Revision3's COO, told me Monday about the times he'd put money from his own bank account into Revision3's coffers to make sure it made payroll. Those lean days are long past for both of Rose's companies. Even as the stock markets waiver, Web startups seem flusher than ever. A Microsoft ad deal has buoyed Digg; the online-video boom is taking care of Revision3's paychecks.

Are we going to see this kind of party scene at next year's SXSW? Let's be clear: SXSW was a good time, not a boundless bacchanal. Nothing smacked of excess: A mild dose of star power is enough to intoxicate the deskbound Web designers who attend the festival. But I noticed that no one talked about the stock market once the whole week. SXSW was a comfortable bubble. As the Webheads fly back home, will they even feel it popping?

Normally our policy is to not comment about things like this but this morning's rumors about a bidding war involving Google and Microsoft have created such a stir we feel compelled to tell you all directly that they are completely inaccurate.

You're upset because we've reported the following. Digg is painfully slow. Its search functions are useless. It employs secret moderators while pretending to be something it's not — a democracy. Users — obnoxiously self-important themselves— tend to revolt every couple months. Top stories don't get covered on Digg, videos of dogs licking your screen do. Digg is easily gamed. And what's more, if you're the right kind of company — one that might buy Digg — Digg will explain how to easily game it. But even then, Digg can't close a deal.

Our guess, Jay, is that what happened is you'd rather us report only good things and not what actually happens. So because I get paid by pageviews and pray at the mighty altar of Digg I'm only happy to comply. Digg plans to launch more customization and analytics features in the coming year.

Rumor has it these new features could increase the value of advertising on Digg from pennies per thousand views it to perhaps even nickels. Expect Digg not to get the $300 million it asked of IAC, but much much more. And for Jay Adelson to finally catch a break.

We, the undersigned (comment to join), are ready to find out if there is more to social bookmarking than Digg. We are going to stop submitting to Digg. The alternatives are plenty — now is the time to venture into new territory. As we organize, we will evaluate and find a new space.

When a digital identity, like a Digg account, becomes penalized through its consistent interaction with a website we assume that site falls into one of two categories. Either (a) the site in question is ill-suited to become a healthy social network or (b) the premise of the social network is such that it is based on competition.

Digg is, in part, a game. It always has been — and that is one of the reasons we love it. That it helped us share useful, entertaining or interesting content only made it that much more fun.

Unfortunately the rules to the game have never been under the community's full control. As far as we can tell, the rule-makers barely listen to us. The latest change in the algorithm, along with rumors of secret editors, auto-buries, etc., have led us to believe it is time to break ties with Digg.com.

Here are a list of the main charges against Digg:

1) Lack of communication and disregard for the Digg community
Digg is not a newspaper, a magazine, or a blog. It produces no content of its own and is entirely dependent upon its users for traffic. Digg users hunt down the stories online, craft the descriptions and titles, digg the stories, provide all the comments. Despite this dependency, anecdotal evidence suggests that Digg has repeatedly failed to respond to its users and address their concerns.

2) Unexplained and unacknowledged banning of top users
cGt2099, Emobrat, and others who have submitted hundreds of quality stories to Digg were recently banned under suspicious circumstances. Digg did not acknowledge these bannings, nor make any public explanation as to why they took place. These are not the actions of a "democratic news site."

3) Lack of transparency — Digg only shows you the stories that people have dugg, but not the ones that are buried.
This has resulted in the birth and flourishing of bury brigades, whose existence has gone unacknowledged, but which undoubtedly have the capability to shape what content gets onto the front page without any interference or objection from other Digg users.

4) The auto-bury list - For months, dozens of sites have been on an auto-bury list, often with no explanation whatsoever.
These sites often get submitted to Digg and then are invariably buried after a certain amount of time. While it's up to Digg what sites it wants to allow, it's important that if it brands itself as a democratic news site, it makes clear why it bans these sites.

5) Repeated and flagrant disrespect of its top users
Digg's top users generate roughly 30-50% of Digg's front page content but repeated and unexplained changes to the Digg algorithm have penalized the ability of top users to get front page stories promoted. Perhaps worst of all, this has resulted in other stories from lower ranked users with less diggs being forced off the "Hot In Upcoming" pages and hurt their ability to shine.

In short — the site has become too powerful a media force and its lack of transparency and faith in the community is reason for concern. In addition, the allure of instant traffic has led to the manipulation and abuse of the site by trolls and spammers.

The collective "WE" built this site from the ground up and while it is sad to leave it, the time has come to move on. We as a loose group of social bookmarkers will find a new community that will allow us to stay in touch and stay informed.

If Digg is a game then we are ready to play for keeps. What happens if the most powerful users in the community decide to leave? Will others join? Is Digg anything without us? Let's prove it.

—Andy Sorcini (mrbabyman), David Cohn (DigiDave), Muhammad Saleem (msaleem), Reg Saddler (zaibatsu)

Emerging briefly from the heaping pile, Adelson did admit that an acquisition would be easier for a company Digg's size than going public. But mostly Adelson was just being cagey. Just like he was a couple of months ago when I saw him in New York. "Why all the Digg coverage? Isn't Digg old news?" he asked me. Why all the complaints, Jay? Getting bored of running Digg?

Diggnation, a beer-soaked roundup of the top headlines on Digg, relies on Rose's on-screen talent, and is still Revision3's biggest show. A News Corp. stake could bring distribution on MySpace and Hulu — and, most importantly, keep Rose's interests aligned with both Digg and Revision3 after a News Corp. buyout. Word is News Corp.'s newly launched Fox Business Network, the CNBC rival, also wants to use Rose for coverage of CES, the large gadget trade show in January.

It's a curious rumor, especially for its specificity and detail. The only problem with it? No one close to Revision3 seems to have heard anything about the plan. So this deal could be nothing more than a cocktail-napkin sketch circulating within News Corp., not yet refined for the negotiating table. Or, perhaps even a trial balloon, strategically leaked.

Burrell told the Financial Times he spoke with angel investor Ron Conway prior to teaming with Arone and Young on DanceJam. In an interesting side note, business partners might be surprised to learn that prior to his tech career, Burrell also dabbled in music. He's perhaps best know for his 2006 album titled Look Look Look. And here's a picture of Burrell with fellow entrepreneur Jay Adelson, the CEO of Digg.

Digg recently inked a $100 million, multiyear ad deal with Microsoft. On those revenues alone, Digg's acquirers could easily justify a $300 million to $400 million purchase price; if Microsoft is paying about $30 million a year for Digg's banner-ad inventory, paying that price would mean a modest 10x to 13x multiple on revenues.

So who is it? A source rules out all the big Internet players — not Microsoft, not Google, not Yahoo. CBS, a big Web acquirer of late, has taken itself out of the running. So who could it be?

Two possibilities: The New York Times Co. and the Washington Post Co. Both the Times' Arthur Sulzberger and the Post's Donald Graham are big believers in a digital future. And both can see firsthand how much traffic Digg contributes to their websites. If I were to place a bet on those two? I'd say the Post, which already owns Slate and has close dealings with Microsoft; Digg's Microsoft ad deal would not discomfit Graham the way it might other businessmen. The Post also has a stronger balance sheet, with a market cap four times the Times'.

That's pure speculation, of course. Acquisition talks fall apart all the time — and for Digg, especially, with its history of almost-but-not-quite deals, I wouldn't be surprised if nothing came of this latest rumor. Still, it's telling that the Valley's talk about Digg has changed from scoffing at its overinflated valuation to talking about who's willing to meet Digg's terms.

Digg CEO Jay Adelson gave me the standard noncomment about "rumors and speculation." But given his transcontinental commute from New York to San Francisco, I wouldn't be surprised if he'd be glad to put his company up for sale. For founder Kevin Rose, a sale would be more emotional. He'd have to be comfortable with whoever buys the company, since he'd likely stay involved. His Diggnation podcast, which draws on headlines from Digg, is one of the centerpieces of his other startup, Revision3. Digg's contentious audience, too, might not take to the site's new owners. That's the biggest obstacle, I suspect, to any deal happening. Those who would profit from the wisdom of crowds must contend with their madness, too.

(Photo by briancaldwell)

Probably the biggest surprise last night was that despite Facebook's busy day announcing new features to allow users to spam each other, one of the company's Harvard connections still showed at last night's Founders Club party here in New York. Which one? ConnectU founder and litigious claimant to the Facebook throne, Divya Narendra, of course.

What, you were expecting Adidas? I asked Narendra what he really thinks of Zuckerberg, but he wouldn't. Didn't want to piss off his lawyers. Narendra was happy to dish on fellow wannabe Facebook founder Aaron Greenspan, however.

"I have no idea how he got that New York Times article," Narendra told me. "He has nothing to do with any of this."

Bitches just jealous.

New York angel investor Ron Conway also turned up last night. I'd have snapped a photo of him, but for a big fella, the man pulls a mean pirouette at the sight of a camera. And did you really want to see a photo of his backside? Silicon Alley wantrepreneurs are not allowed to answer that.

One thing I didn't know about Adelson: Apparently he lives in Dutchess County, north of New York, and commutes to San Francisco to run Digg. Does this mean we can claim him for Silicon Alley? (Ed.'s note: No.)

CollegeHumor's Zach Klein and Ricky Van Veen also showed, dragging down the whole affair with their ironic style and funny-looking glasses. They only cost $7 dollars on eBay. Father figures Josh Mohrer of BustedTees and Vimeo's Jonathan Marcus mostly managed to keep the boys in line, though dress code violations (sneakers) barred the entire crew from the Rainbow Room afterparty. Nobody said beauty was easy, fellas.

We don't want to shut anyone down and we're not suing digasvgirl.com. Digg, like all companies, simply wants to be able to continue using its trademarks. When a company provides a similar service (online voting) and has a similar name (i.e. dig in the name), we risk losing our trademark if we don't ask them to alter the violation of our mark.

Yes, my picture is on that site, and I've been willfully ignoring it for about a week now. No, I did not submit myself. No, I'm not particularly flattered by my inclusion, and definitely not flattered by the picture they used. Yes, I know that the people who created it meant the site to be tongue in cheek. But it's hard to keep your tongue in cheek when you're visibly drooling, isn't it, boys?

Yes, it could be considered hypocritical to disparage a shallow rating site when I've had my fair share of superficial moments, but at least I stand behind all of my catty judgments. Heck, HotorNot cofounders James Hong and Jim Young put up a giant billboard of their naked bodies, along with the ratings users had given them.

Apparently the people behind DigaSVGIrl want to stay anonymous as "part of the fun." Hey, kids, judge not lest ye be judged. What are you hiding? I'm not sure why they're staying anonymous, unless they're embarrassed by the site, which I certainly understand. The joke failed. Everyone knows that the only scorecard around here that matters is the bank statement.

• The Web 2.0 Bowl is tonight. Watch as Web celebrities Jay Adelson from Digg, AOL founder Steve Case, angel investor Ron Conway and New York Times reporter John Markoff face off in a brain battle to see who can remember details about the Internet industry and the people who created it. Like Jeopardy, only replace Alex Trebek's bitchin' mustache with host John Battelle's oompa loompa glow. [Web 2.0 Summit]
• 
  
• Frog Design hosts an open studio tonight. [Upcoming]
• 
  
• We hear that website rating service Quantcast is hosting an open-bar first anniversary party tonight at 6 p.m. at Thirsty Bear in SOMA.

Got a to-do that's a must-do? Send it to calendar@valleywag.com. Check out more events on our Google Calendar:

(Photo by Blake Ross)

From the photos I've seen, Fitzpatrick, who recently left blog-software maker Six Apart, looked hung over, bored, or both, as he listened to a bunch of bozos in Renaissance Faire garb blather on about using social networks to reform the budget process. Update: Despite being listed as a confirmed attendee, Wales, we now hear, wisely phoned it in with a video. Canned video presentations, "workshops," and a Shakespearean-themed dinner? It would drive anyone to drink. If you want to know why tech causes are poorly represented in Washington, D.C., this event sounds like it provided a key lesson. (Photo of Fitzpatrick by blakley)