Google has plans for Digg

Google Inc. has signed a letter of intent with Kevin Rose to purchase the social news site Digg.com for around $200 million, tech blog TechCrunch reported.

In contrast to Google News, where the stories are selected by computer algorithm, Digg’s news stories are submitted by users and ranked according to user approval ratings. It is known that Google was interested in using Digg’s technology to help improve its search results by having users vote on their quality.

Digg was formed in 2004 by young entrepreneur Kevin Rose who used a programmer he found online for $10 an hour. It is known that he paid $1,200 dollars for the domain name digg.com and $100 a month for hosting it, which is now ranked as one of the 100 most trafficked sites on the Internet by Alexa.

Digg has so far raised around $11.3 million in VC. Most of Digg’s revenue comes from a three-year ad deal with Google rival Microsoft, which may be terminated on a sale to Google, TechCrunch said. Ouch !