This latest bit of information was shared in a blog post earlier today that details how the DiggAds system actually works as well as the results thus far.
Here are the key details from Digg's comments:
- DiggAds is powered by a complex auction-based system that attempts to serve users with the highest quality ads -- Digg assigns its own quality score to ads -- while factoring in the advertiser's bidding price. It's like Google Adsense but with quality scoring. The idea is to reward high quality ads with lower CPCs; the more diggs an ad gets the less the advertiser pays.
- Feedback from users is mostly positive, but one of the biggest user requests is to be able to comment on ads. Users are also confused by buried ads that reappear, but Digg suggests that in this case it's just advertisers experimenting with ad format and resubmitting.
- DiggAds will evolve to include comments and address the "long-live" ad issue where ads get misleadingly high digg counts.
- The system is working with Digg saying that, "From a revenue perspective, things have been great."
What's especially interesting is that DiggAds displays advertisements to site users in the same format as other Digg content -- so ads are a part of the Digg stream like other stories -- but for the most part users appear to be embracing the model instead of rejecting it (and Digg's community has historically not been shy over voicing displeasure with things they don't like).