Rose was one of a wave of start-up entrepreneurs to tentatively step into the wasteland left by the burst of the dotcom bubble. At its peak in 2008, Digg was the possible target of a $200m takeover by Google. Since Google walked away, the decline of the company has been unrelenting.
After losing users to rivals like Reddit, Delicious and, later, Facebook, Digg tried to re-capture an audience with the launch of a revamped site last year. It didn't work. Users were dissatisfied and upset and left to find their news elsewhere.
Sarah Lacy (who wrote the original cover story for BusinessWeek) posted her reaction to Rose's exit on TechCrunch: "The lesson from Digg is crucial as Silicon Valley's ecosystem has made it easier and easier to start a company. It's that a great product is necessary but not nearly enough. Building a real company is harder, and it takes execution and leadership. Things like a New York-based CEO and a sometimes-distracted co-founder took a toll on Digg in its most pivotal days."
Like a number of entrepreneurs, Rose was the personification of his company. He podcasted on the top Digg stories and was heavily involved in the promotion of the ill-fated Digg 4. Some bloggers, Lacy and Michael Arrington included, are saying that his exit is the final nail in Digg's coffin.
Seeing as it's cheaper to learn from others mistakes than make your own, what business lessons can you pull from Digg's decline?
Don't underestimate your competition
According to VentureBeat, traffic at Digg has dropped from 16 million unique users last August down to 8.2m today. The rivals have ballooned: Reddit lays claim to 14m unique visitors. However, as Lacy points out, Reddit and Delicious weren't the biggest threats to Digg. It was Twitter that sank them. She says: "It's another example that it's frequently not the company that comes up with something first that nails the execution."
Timing is everything
Rose had a falling out with his co-founder and CEO Jay Adelson who subsequently left last April. Rose took over as CEO but was gone by September to make way for current CEO Matt Williams. His tenure did more harm than good. After Adelson left, Digg had to lay-off 10% of its staff to cut costs.
The constant shifting of authority meant that bad decisions were made at crucial times. The reason Google walked away was, according to VentureBeat, because the team at Digg was not a good fit. Google made this call after interviewing each Digg employee individually.
Don't lose touch with your customer base
Sharp growth is something all businesses hope for, but even if growth comes, it's important to stay connected with the people fuelling it. For example, with Digg v4, the site dropped the top users section, meaning frequent contributors were no longer rewarded. News sources were also allowed to auto-submit their own content for the first time. This took yet more control away from the users. In fact, the site removed features that were actually quite useful. For example, you couldn't bookmark your favourite stories any more. Catagories of news became diluted and the new version dropped the "bury button" - traditionally the way users had kept the site free of bad content. Bottom line: Digg v4 wasn't what the users wanted.
Play the long game
Kevin Rose enjoyed the start-up process more than the managing process. He was criticised for spending too much time on other projects like Revision3 and Pownce when he should have been ploughing his hours into Digg. There's nothing wrong with developing new ideas and experimenting with new ventures. That's how many great entrepreneurs are made. But be wary of neglecting your other babies at the same time. After all, it's telling that TechCrunch posted that Rose spent more time on Twitter than Digg.
Bounce back from your failures
Although he hasn't confirmed it, the word on the web is that Rose is already looking for to secure $1m in funding for his next project. Follow Rose's example of having a clear picture of where you see yourself going next. If it really isn't working at your current project, fix on what you've learned and apply it next time around.