At first glance, it sounds like the end of the road. Either $500k was a bargain for a site that was once the 24th most popular website in the US, or it was in terminal decline.
But look again and you see that the site was bought by the startup developer Betaworks - with the clear intention of merging with their social news aggregator news.me. There's potentially a big synergy there - a site that encourages users to vote up the best stories on the web (with a Newsroom section in beta) and a site that collates all the news your contacts are sharing and sends it to you in a daily email.
But there are two interesting differences that have relevance to other aggregators in an increasingly crowded market:-
1) news.me is focused on news stories (as you might expect from the name). It does not have digg's ambitious aim to "discover and share content from anywhere on the web". This makes it clearly relevant to publishers, and more of a Taptu than a Flipboard.
2) Digg does not internally curate. Or at least in theory, the Digg team do not curate, the whole idea is that the users curate - and many of the blog posts in the last couple of days have focused on the problems that arose when they did try to curate. news.me, by contrast does curate. Or at least it takes the news your friends are sharing and, using some unspecified algorithm, selects the "best five".
That second point is crucial. If you want beautiful aggregated, uncurated news, you might go somewhere like newsmap. If you want a wild stream of semi-curated news (where you choose the sources), you might go to Twitter.
If you want un-aggregated, mostly human curated content, you can go to your publisher site of choice - or indeed one of their social media outlets on Tumblr, Facebook or Twitter.
Maybe now the time is ripe for properly curated, social media driven, news aggregators. And maybe the new Digg will show us how?
Info: The Digital Media team will visit Betaworks and others in NYC in October to see how things are progressing - a select band of publishers are invited to join us by clicking here
Photo by Ryan Somma from Flickr (Creative Commons).