Nah Digg’s business tanked cause it’s whole point to ‘digg’ stuff that you found interesting died with the ‘share’ button. One day Digg was a cool new feature which you could use to share whatever you liked with bunch of people you knew, the next day you could do the same but share it with your friends, and your friends’ friends.
Perhaps they thought they could handle it, but obviously they did not come with anything better or more interesting and took the dive. To be honest even 500k seems too much.