According to Michael Arrington: "The two companies have reportedly signed a letter of intent and are close to a deal that will bring Digg under the Google News property. The acquisition price is in the $200 million range, says one source."
Google has a history of buying companies -- YouTube, Blogger, Picasa, GrandCentral, Keyhole (Google Earth), Writely (Google Docs), JotSpot (Google Sites), Dodgeball etc -- so this wouldn't be a surprise. Also, as TechCrunch points out: "Most of Digg's revenue comes from a three year ad deal with Microsoft, which will be terminated on a sale to Google." This would add a little spice, and might tempt Microsoft to make a counter-offer.
The trickier question is why Google would want Digg in the first place, apart from the usual: it would provide a platform for Google to place zillions of adverts. Digg might benefit from association with Google, which smooches prime ministers and presidents, but would Google benefit from association with Digg, which appears to be increasingly dominated by jerks?
In any case, we've been round the houses on this one before. During the last "Google buys Digg" inflammation, in March, Digg CEO Jay Adelson posted a note:
Normally our policy is to not comment about things like this, but this morning's rumors about a bidding war involving Google and Microsoft have created such a stir we feel compelled to tell you all directly that they are completely inaccurate.
Whether this is another non-story remains to be seen....
