Last month Google launched SearchWiki,allowing users (when logged in) to rate websites and adjust the search rankings that they see. The benefits for Google are potentially huge.

Suddenly they can now tap into the opinions of real people. If a website receives positive ratings from thousands of users then Google can be fairly sure that it’s a high quality site, potentially deserving a boost in the rankings. As Google Product Manager Cedric Dupont says: “We’re always looking at user data as a signal.”

With the launch of SearchWiki you have to ask the question of what now for Digg? Back in March Google entered into negotiations with Digg, with a view to a proposed $200 million acquisition, only to eventually walk away from a potential deal in July.

At the time I thought it was a good move from Google. Digg, being the leading social news site, had a wealth of information and it was the one area where Google did have a weakness. Relying on an algorithm is fine, as long as you have the best algorithm. But there was always the chance that Microsoft or Yahoo could successful integrate user ratings into their rankings and present a high quality alternative to Google.

However, SearchWiki has now been launched - you have to wonder whether Google was simply negotiating with Digg to gain some inside knowledge of their voting system - and it leaves Digg in a precarious position. Who can Digg turn to now? In reality there are only two companies likely to show any interest:

• Yahoo which has Yahoo Buzz, not the most successful social news site but one nonetheless. Acquiring Digg would create integration problems.
• Microsoft has been linked to Digg but the opposition to a takeover from Digg users themselves would be substantial. At a time when Digg has alienated many of its power users an unpopular takeover would risk doing further damage.

What’s worse is that Digg’s one attractive feature, the fact that it’s the leading social news site on the web, is now under threat from Mixx.In the space of a year Mixx has gone from nothing to a strong competitor and there’s a good chance of the gap being completely removed in 2009.

So with Google moving on where does Digg go from here?

It’s looking increasingly likely that the Digg investors are going to have to earn their revenue internally rather than through negotiating a major takeover. For a long time I’ve thought that Digg should sell clearly labeled sponsored posts within their web pages. At the moment this effectively happens… it’s just that companies hire power users to promote their articles.

But what do you think? Does Digg risk falling by the wayside or will they remain the dominant force in social media, perhaps eventually being taken over by Yahoo or Microsoft?

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