Digg for sale?

The on-again, off-again rumors that Digg is for sale went back into the "on" position Friday. TechCrunch is reporting the user-generated news site will fetch a bid of as much as $225 million, with Google and Microsoft the most likely contenders.
The discussed price sounds like a lot of money, but just a few months ago the site was rumored to be selling for $300 million. It seems the slowing economy and general market angst have collars tightening even in Silicon Valley, and even for the "hottest" startups.

Subsequent to filming the video, Digg CEO Jay Adelson posted a blog denying the rumors. Still, Digg's worth is the subject of intense debate -- even if just for "academic" purposes.
Digg raised $11.3 million from Greylock Partners, the Omidyar Network, and angel investors who no doubt would have loved to cash out at $300 million valuation. They might now be happy to "settle" for $200 million given the economic backdrop.
But a well-informed source tells me "it's hard to get to $100 million valuation [for Digg], much less $200 million-plus."
Assuming monthly page views of 200 million, the source estimates Digg is generating revenue of $600,000 a month, or $7.2 million a year. (My source, an angel investor who requested anonymity, assumed a $3 CPM for Digg, which I cannot independently verify.)
There's also conflicting data on Digg's page views -- the highest is Quantcast at 240 million per month, which another soruce familiar with Digg says is accurate. Even at those levels, my VC source is skeptical of the $200-million-plus price tag.
[Update: Digg CEO Jay Adelson declined to discuss CPMs but confirmed the Quantcast data. "Quantcast is the only measurement service with a direct measurement pixel on our site," he writes via email. "While it's not perfect, it's still the most accurate third-party measurement source out there as far as we're concerned."]
Digg, which has about 50 employees, is not profitable. My source estimates that if a big buyer like Google or Microsoft were to fire 50% of the staff, they'd only be able to generate $3 to $4 million a year in cashflow, based on current metrics. That's only worthwhile if Digg's growth "is going through the roof," says the source. "And if [growth] is going through the roof, you don't need to hire Allen & Co."Yahoo tech ticker.