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Digg Lays Off Over a 3rd of Staff

The CEO of San Francisco-based Digg, Inc. announced yesterday that it will lay off 25 employees, 37% of the site’s total staff. This followed chief revenue officer Chas Edward’s announcement that he was quitting to take a job at another company.

Things have been looking grim for Digg in recent months. The company had a major round of layoffs over the summer. The website’s redesign, unveiled in August, has been poorly received. And competitor Reddit keeps nipping at their heels. If the remaining employees weren’t feeling demoralized before, this should do it.

The layoffs are part of a strategy to make the company profitable by mid 2011. Memo from CEO Matt Williams after the jump.

Team,

When I joined Digg six weeks ago, we set an immediate focus on improving the web site. We listened carefully to user feedback and started making changes to generate momentum in our business.

As I mentioned in one of our first all-hands meetings, another top priority was to take a hard look at the entire business, across product, sales, and operations. Through the time I have spent with each of you, I’ve been impressed by the commitment and enthusiasm you’ve shown. I’ve also learned a great deal about what is working well at Digg, and what is broken.

Many things are working well. The team is listening and acting quickly on the feedback from our passionate community. We’ve been able to deliver nimbly on the new platform, with over 100 bug and feature releases to the web site in the past two months. Our Diggable ads product has seen a notable increase in use by advertisers and clicks by users.

Unfortunately, to reach our goals, we have to take some difficult steps. The fact is our business has a burn rate that is too high. We must significantly cut our expenses to achieve profitability in 2011. We’ve considered all of the possible options for reduction, from salaries to fixed costs. The result is that, in addition to lowering many of our operational costs, I’ve made the decision to downsize our staff from 67 to 42 people.

It’s been an incredibly tough decision. I wish it weren’t necessary. However, I know it’s the right choice for Digg’s future success as a business. I’m personally committed to help find new opportunities for everyone affected by the transition. Digg’s Board members have also offered to help find placements within their portfolio companies.

Let’s please use today to show our sincere appreciation for our friends and colleagues who will be moving on. Tomorrow, we’ll go forward with a new strategy for Digg.

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