The narrative might be longer than 12 months. Digg was the poster boy for web 2.0. At a time, they were in a small bucket of companies that was going to "turn" things around after the crash. This tale might be remembered just like friendster is remembered when talking about social networking. It will be even louder if reddit or another social news site really starts dominating the market. Digg might always be the company that blew it by not listening to their users and not iterating / testing changes.
Even worse, the narrative will now be 'Digg is losing its numbers and was caught out artificially inflating their advertisers articles on the site'
The worst thing about this narrative is that the company itself isn't in control of it.
And I get the feeling Digg is on the road to becoming a cautionary tale in bullet point presentations, the Friendster of social news.