This is how I imagine it went down at AOL....

AOL desperately wants to make a comeback. They go out and buy Weblogs Inc. for $25 Million to get Jason Calacanis to resurrect the fallen giant.

So Jason is jacked up. He's made a bundle of cash and he comes into AOL firing. The company is in a disastrous place. There are a key executive or two that believe in Social Media, but can't pull it off themselves, but they now have Jason.

He's the perfect guy. Tireless, savvy, enthusiastic and a true entrepreneur. Jason shows up at AOL and he's thinking. Damn, it's worse than I thought. The products lack personality, leadership is looking for a leadership, but there is an opportunity to change the world. Totally determined that he is going to get the lumbering giant to move quickly. He plays part politician (damage control) and fires up the bulldozer to move all the other people aside that just sat there as AOL crumbled. Next thing you know, a brand worth several $100 Million is a new social media site. AKA, a Digg clone. What? Yeah, that's right....So massive applause to Jason for pulling it off, even if it was a bad idea. Rumor has it this is as fast as anything this big has ever happened at AOL.

What should have AOL done if they wanted into the Digg business so badly? It's simple. Buy Digg. With an acquisition, you get the kind of users that participate online and submit stories.

Why was it a terrible idea. First, Netscape was a large site with loyal users turning out 100s of millions of pageviews per month. Valuable pages when you're focusing on an ad business. Secondly, who uses Netscape? It's not someone that uses Digg. Netscape is a portal that had a chunk of loyal users that have never heard of Digg. Now, they're pissed and nothing is worse than negative PR from your users. Just ask AOL. They can tell you. Third, brand equity. Social Media and Netscape are not even similar. The only thing that makes sense is to launch a social media browser under the Netscape brand. Now, they are bleeding loyal users that they may never get back. Even if they had to pay $150 Million for Digg it's cheaper than the damage.

I think I even read once that Calacanis offered $5 Million to Digg when it was small. Surely he could have stepped it up with AOL's pocket book.