In a market starved for venture capital, Digg recently was able to go against the grain and snap up $28.7 million from Greylock Partners, Silicon Valley Bank, Highland Capital Partners and the Omidyar Network.

But, according to a recent piece in BusinessWeek, Digg has some issues. So, it is no surprise that the company's mantra is now profitability – not eyeballs.

For the first three quarters of 2008, Digg was able to generate a mere $6.4 million in revenues. The net loss came tp $4 million (according to BusinessWeek).

At the same time, Digg continues to be a highly popular site, with more than 16 million unique monthly visitors (according to comScore). And, the growth rate remains robust.

But this may not be enough. After all, the Net ad market appears to be frail, making it even more difficult for Digg.

So, if a company with the momentum of Digg is having troubles getting revenue traction, just imagine what many other Web 2.0 operators are experiencing. In other words, expect a major shakeout over the next year.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a valuation website.

Several years ago, I talked to Jay Adelson, the cofounder of Digg, a popular news rating service. We discussed the keys to successful ventures and the importance of building an enduring platform. I liked when he said that it is critical to have an "unfair advantage."

Well, so far, things seem to be working nicely. In fact, Digg has raised $28.7 million from a group of investors including Greylock Partners, Silicon Valley Bank, Highland Capital Partners and the Omidyar Network. In all, the firm has raised about $40 million.

The capital is meant to reinforce the Digg platform. This means doubling the staff, which now stands at 75 people, adding new features like publishing analytics, and moving into foreign markets.

Of course, there have been many rumors that Digg has been exploring sellout talks with biggies like Google (NASDAQ: GOOG). But with the current uncertainty in the financial markets, it probably makes sense to wait things out. Besides, Digg has a highly loyal user base who may not want to see a deal get done.

I recently saw a presentation from Dan Nye, who is the CEO of LinkedIn. Of course, all the metrics were spiking. Then again, LinkedIn is the place for professionals to connect.

So, this week the firm has snagged $53 million in venture capital. The investors include Bain Capital Ventures, Sequoia Capital, Greylock Partners, and Bessemer Ventures. As a sign of their optimism, the valuation of the investment came to around $1 billion.

While Facebook and MySpace get lots of buzz, I think LinkedIn is a more interesting play. Basically, the company is leveraging user-generated content to build an immensely valuable database. For example, if an advertiser wants to target someone located in California that is interested in Linux systems, you will definitely get some hits. This is critically important. After all, many other social networks have a tough time monetizing things.

I recently saw a presentation from Dan Nye, who is the CEO of LinkedIn. Of course, all the metrics were spiking. Then again, LinkedIn is the place for professionals to connect.

So, this week the firm has snagged $53 million in venture capital. The investors include Bain Capital Ventures, Sequoia Capital, Greylock Partners, and Bessemer Ventures. As a sign of their optimism, the valuation of the investment came to around $1 billion.

While Facebook and MySpace get lots of buzz, I think LinkedIn is a more interesting play. Basically, the company is leveraging user-generated content to build an immensely valuable database. For example, if an advertiser wants to target someone located in California that is interested in Linux systems, you will definitely get some hits. This is critically important. After all, many other social networks have a tough time monetizing things.

Microsoft Corp.'s (NASDAQ: MSFT) latest acquisition amounts to a quick exit for Greylock Partners and Lightspeed Venture Partners. The Redmond, Wash.-based giant, as part of a new push into virtualization, said Monday it would acquire Calista Technologies Inc., a 35-employee, San Jose, Calif.-based maker of desktop virtualization software

It was founded in 2006 and isn't scheduled to ship its first products until later this year, according to its Web site. Calista got a round of undisclosed size from Greylock and Lightspeed in 2006. The company also received $1 million from venture lending firm Western Technology Investment of San Jose.

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DealBook reports that Google Inc. (NASDAQ: GOOG) is shoving more chips to the middle of the table in its battle for a stake in Facebook.

Facebook's investors, which include Accel Partners and Greylock Partners, want a deal that values Facebook between $10 billion and $15 billion. That would mean that Microsoft Corp. (NASDAQ: MSFT) or Google would have to fork over $1.5 billion for a 5% to 10% stake.

Who will win this Facebook face-off? Google wants to raise the price so high that Microsoft will walk away. But Microsoft is said to be willing to pay any price to keep Facebook away from Google. We'll know who wins in 24 to 48 hours.

But we won't need to wait that long to find the real winner -- Facebook CEO Mark Zuckerberg and his investors are guaranteed to make big bank on this deal regardless of who wins the Google-Microsoft face-off.

Update: The New York Times reports that Microsoft won the Facebook face-off -- paying $240 million for a 1.6% stake -- valuing Facebook at $15 billion. That's 100 times its expected $150 million in 2007 revenue -- valuing $1 of Facebook's sales at 7.1 times more than a dollar of Google's -- whose Price/Sales (P/S) ratio is 14.1 -- and 17.5 times that of Microsoft's which sports a P/S ratio of 5.7. It looks like the old school Harvard ties paid off (that's where Gates, Ballmer, and Zuckerberg attended college).

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Google or Microsoft.