Currently, Digg is the #2 news site on the internet behind cnn.com. But Digg is different than other major online news sites, Digg is a social news site and should be evaluated not just as a news outlet, but also for its potential as a major social network.

According to compete.com, Digg had 23.5 million uniques in May, and Facebook had nearly 32 million. Although they had similar uniques, Facebook had over 360 million visits while Digg had only 69 million. How can Digg increase their number of visits and subsequently raise the advertising inventory capable of validating their $225 million valuation?

Sociology.

While looking for key differences between social interactions on both Facebook and Myspace, I noticed a lot of similarities. Both sites have profiles, activity feeds, friends lists, and a wall (similar to shouts on Digg). There was also one glowing difference-the friends I have on Facebook are, for the most part, my real friends.

While I share real connections with people on Facebook, nearly all of my friends on Digg are total strangers that share a common denominator which is the mutual appreciation for a specific story or topic. So how does Facebook solve the problem of creating community around specific topics? Groups.

Wikipedia describes a group as, “a collection of humans who share certain characteristics, interact with one another, accept expectations and obligations as members of the group, and share a common identity”.

When people come together they communicate and work towards a common purpose. This creates a more engaged community and one that increases visits. There are plenty examples of extremely popular Facebook groups that created quite a bit of traffic, no doubt.

The hardest challenge Digg would face in creating a Groups functionality would be the ability to game posts. A simple algorithm change to devalue diggs from fellow group members could be a good starting point to solving the missing link for Digg..