Digg is known for drumming up traffic to the sites that are linked from its popular home page. Can it perform for online advertisers too?

According to three of its executives, its recent forays into ads that play along with its vocal, tech-savvy audience are making gains. One major push involves what the San Francisco company calls Digg Ads, which look like the articles that Digg users submit and vote to promote to the home page.

If they like the ad, they can vote it up, which increases the number of times it will appear. If they don’t, they can “bury” it.

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When Digg introduced a new toolbar in early April that added a thin strip – known as a ‘frame’ – to the top of pages submitted to Digg, a publisher outcry forced the social media aggregator to back down. It modified the new DiggBar so that only logged-in users would view submitted stories within a Digg frame and Web address, and also offered them the option to turn off the toolbar altogether.

But despite Digg’s move, the controversial practice of framing seems to be making a comeback on the Web. Danny Sullivan, editor of the Web site Searchengineland.com wrote in an article about Digg’s toolbar changes, that Facebook, Ask.com and StumbleUpon have all begun framing links recently.

Web usability expert Jakob Nielsen argues that “frames break the fundamental user model of the web page.” “All of a sudden, you cannot bookmark the current page and return to it (the bookmark points to another version of the frameset), URLs stop working, and printouts become difficult. Even worse, the predictability of user actions goes out the door: who knows what information will appear where when you click on a link?”

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If you needed any further proof that this is an age driven by users much more than publishers, look no further than what’s happening right now with Digg.com, a site you probably think of as a stand-in for all that is user-generated, unedited and anarchic.

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Yesterday, New York-based start-up incubator Betaworks raised $2 million in funding for its URL-shortener project, Bit.ly, and spun it out as an independent company. The funding raised some eyebrows, with some speculating if Bit.ly, one of the dozens of link-shortening services, was worth a rumored $8 million. I fall in the camp of those who think Bit.ly is worth the money.

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According to Bob Buch, vice president of business development at Digg, sharing is caring. Or at least it is when it comes to being a successful Web publisher.

In a Wednesday presentation at the Web 2.0 Expo in San Francisco, he advised content providers to harness the power of social-networking sites and use “share” buttons (such as Digg’s, of course) to optimize Web traffic.

If you love something–and in this case, it’s lots of page views–you should set it free, he said. The users you send to Digg or other social news sites will reward you with plentiful hits.

“One Digg is worth a lot of users coming back,” Mr. Buch said.

He recommended hiring social-networking experts to help use sites like Facebook and Twitter to increase Web traffic. “If you don’t know what an ROFLCopter is, I would recommend going to your local high school and hiring somebody who does know what that means,” he quipped.

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Looking at a regular graph of traffic data from Digg and Facebook, it would be easy to assume that Digg is lagging far behind Facebook’s staggering growth. However, Compete just produced a very different graph that compares traffic at Digg and Facebook since their respective launches, and according to this data, Digg is actually doing better than Facebook. Facebook is obviously older than Digg, so while it has more traffic now, Digg’s growth since its inception has actually been faster than Facebook’s.

As you can see from the graphs, Digg and Facebook had very similar growth curves for the first four years of their existence, and according to Compete’s historical data, Digg’s traffic was actually greater than Facebook’s for 33 out of 51 months.

It needs to be said, though, that Facebook’s user base has exploded over the last year, while Digg’s traffic “only” grew by about 50 percent, according to Compete. During its fifth year, Facebook’s traffic more than doubled from about 28 million visitors to over 73 million.

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Twitter, Digg, Facebook, Reddit, Delicious. These are all social sites that are well known for sharing stories with a massive amount of people. Yahoo Buzz? Not so much. But apparently, it’s also in the business of sharing stories. And today is its first birthday.

In a message it sent out on Twitter, Yahoo (YHOO) notes that a story is buzzed (voted on) every two seconds. It claims that 300 million story clicks have resulted from buzzed-up stories that make Yahoo.com–and incredibly, that it’s the number one social content site.

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It’s 1996, and you’re bored. What do you do? If you’re one of the lucky people with an AOL account, you probably do the same thing you’d do in 2009: Go online. Crank up your modem, wait 20 seconds as you log in, and there you are–”Welcome.” You check your mail, then spend a few minutes chatting with your AOL buddies about which of you has the funniest screen name (you win, pimpodayear94).

Then you load up Internet Explorer, AOL’s default Web browser. Now what? There’s no YouTube, Digg, Huffington Post, or Gawker. There’s no Google (GOOG), Twitter, Facebook, or Wikipedia. A few newspapers and magazines have begun to put their articles online—you can visit the New York Times or Time—and there are a handful of new Web-only publications, including Feed, HotWired, Salon, Suck, Urban Desires, Word, and, launched in June, Slate. But these sites aren’t very big, and they don’t hold your interest for long. People still refer to the new medium by its full name—the World Wide Web—and although you sometimes find interesting stuff here, you’re constantly struck by how little there is to do. You rarely linger on the Web; your computer takes about 30 seconds to load each page, and, hey, you’re paying for the Internet by the hour. Plus, you’re tying up the phone line. Ten minutes after you log in, you shut down your modem. You’ve got other things to do—after all, a new episode of “Seinfeld” is on.

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The year of hope and change is certainly off to a grim start in the tech world. Last week alone saw layoff announcements from stalwarts like Intel (INTC) and Microsoft (MSFT), as well as Web 2.0 companies like Digg, just to name a few. If you’ve lost your job or had your salary frozen and are seriously tightening your belt, the (slightly) good news is that there are more options than ever to keep yourself entertained during these economic end times.

A few months ago, I defended the value of cable, writing that $70 a month wasn’t a bad deal for what you get. But as your wallet gets lighter, you may not want to spend $840 a year for service. Before you fire off a comment saying “Just watch Hulu!” yes, that is a good idea. Between Hulu and the network sites like ABC.com and CBS.com, you can watch just about any program you like for free. But then you’re watching on a small laptop screen while that big TV sits there, idle. You bought the big TV; you should use it.

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It happens several times a day now. Ever since I opened my Twitter account approximately three months ago, the follow alerts have been gradually increasing in frequency to the point that they clutter up my email inbox if I don’t clean them out often enough. “Jessica Kositz (jkositz) is now following your updates on Twitter” my latest alert tells me, and I dutifully click the provided link so that I can peruse Jessica’s profile to determine whether she meets whatever unspoken criteria that would result in my following her back.

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Has news site Digg really made no progress in two years?

That’s what you’d have to conclude from the value investors are placing on Digg after its most recent investment: $164 million.

You’ll remember the hyped Business Week article from more than two years ago that reported “people in the know” said the company’s value was “easily worth $200 million.” The reference suggested Digg and its investors were hoping to steer perceptions that it was worth at least that much.

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Why is Kevin Rose on a publicity binge? In the past two months, the founder of headline-voting site Digg has garnered two magazine covers. There he is, with a smoldering leer on local San Francisco magazine 7×7. The look reminds everyone why Diggnation cohost Alex Albrecht once said that Rose, a prolific dater, has “plowed through everyone in town.” For Inc., Rose participated in a wacky crowd shoot that echoed the Beatles’ “A Hard Day’s Night.” It’s obvious why Rose is a hot commodity: Write about him, and traffic to your magazine’s Web site will soar. (Will he sell print copies? I doubt Digg users visit newsstands.)

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Early every morning, I open my Web browser and load up a half-dozen “aggregator” sites: Techmeme, Memeorandum, Real Clear Politics, Google News, the Drudge Report, and the Huffington Post. This is my first sortie into the day’s news, the way I orient myself to what’s going on in the world now that I no longer subscribe to a print newspaper. After picking clean the smorgasbord of links, I dip into a second set of sites, these pulling in quirkier tales from around the Web: Digg, BuzzFeed, Fark, Hacker News, Boing Boing, and Kottke as well as my personalized Web aggregators at Friendfeed and Google Reader. During the course of the day, I repeat this process often; in my manic hunt for the freshest stuff on the Web, I reload some of these sites 10 or 20 times each.

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Digg founder Kevin Rose had a message for the audience at the Future of Web Apps conference on Thursday: It’s time to grow up.

“We have to do better,” he said in his talk, called “The Future of News,” and said that it’s time for the social news site that he founded in 2004 to to expand beyond the geek set and get some real-world relevance. “Why click a button and make the number go up by one? Why does that matter?”

Digg, after all, gets more than 30 million monthly visitors, but Rose said that the site only has slightly over three million registered user accounts–those are the people actually “Digging.” That indirectly confirmed what Digg critics have been saying all along: that it’s reflective of only a tiny and vocal subset of the Web, resulting in a heavy bias toward anything iPhone, anything Linux, anything Barack Obama, and plenty of wacky local news stories.

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This morning a rumor about Steve Jobs having a heart attack started circulating. The person who started the rumor submitted it to MacRumors using an anonymous proxy IP address. I saw the report right when it was submitted and after some brief research dismissed it. The story was also posted to CNN’s iReport (citizen journalism site) and also appeared on Digg with a large number of diggs (but not yet on the front page). I tracked back and found the story was being promoted by a semi-coordinated effort by members of the 4chan message board.

So, I chose to ignore it, since we get fake rumor submissions daily.

Digg users also figured out that this was likely fake, and despite the concentrated efforts, the story was kept from appearing on the front page due to a corresponding number of Digg users burying the story.

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