The terms of the deal were not disclosed but online reports estimated the purchase price at $500,000.

Betaworks said in a blog post that it had acquired the core assets of San Francisco-based Digg and planned to merge them with its News.me service for sharing articles on iPads, iPhones and by email newsletters.

"The News.me team will take Digg back to its essence: the best place to find, read and share the stories that the Internet is talking about," Betaworks founder John Borthwick said in a blog post.

"We are turning Digg back into a startup," the post continued. "Low budget, small team, fast cycles."

Digg was founded seven years ago by Kevin Rose, who took a position with Internet titan Google earlier this year.

"John understands the real-time nature of the Web and how to capture and surface trends as they occur," Rose said in a statement. "Given his experience with bit.ly, news.me and Chartbeat, I can't wait to see what he does with Digg."

Digg became a global sensation as an online venue for submitting news stories that climbed or sank in rankings based on votes, referred to at the website as "diggs."

More than 28 million stories have been submitted to Digg since it launched, chief executive Matt Williams said on the company's website.

Digg fell out of favor as people shifted to rival services and social networks Facebook and Twitter to share news with friends. Industry figures indicate about seven million people visit Digg each month.

About half of the Digg team was hired away early this year and the Betaworks acquisition reportedly included no employees.

"Over the last few months, we've considered many options of where Digg could go, and frankly many of them could not live up to the reason Digg was invented in the first place -- to discover the best stuff on the Web," Williams said.

"We couldn't be happier to announce that the next generation of Digg will live on with the team from Betaworks."

Williams said that he will be joining premier venture capital firm Andreessen Horowitz as an "entrepreneur in residence." The firm was among the Digg backers.

News.me was launched early last year as a way for people to easily share when friends at Twitter or Facebook are reading.

A hacker group calling itself D33DS posted online a massive trove of data it said was unencrypted in a file pilfered from the Sunnyvale, California-based Internet pioneer "as a wake-up call not as a threat."

Yahoo! confirmed that a file from its Contributor Network (formerly Associated Content) containing approximately 450,000 Yahoo! and other company users names and passwords was compromised on Wednesday.

Security researchers who sifted through the posted data determined that it included information about accounts at other online services including Google's web-based Gmail, AOL, and Microsoft's Live.com.

"We apologize to all affected users," Yahoo! said in a prepared statement.

"We are taking immediate action by fixing the vulnerability that led to the disclosure of this data, changing the passwords of the affected Yahoo! users and notifying the companies whose users accounts may have been compromised."

Less than five percent of the Yahoo! account data stolen had valid passwords, the company contended.

Affected accounts were reportedly at an Internet telephone service called Yahoo! Voices, which is related to the company's instant messaging feature.

"The most alarming part to the entire story was the fact that the passwords were stored completely unencrypted and the full 400,000-plus usernames and passwords are now public," Internet security firm TrustedSec said in a blog post.

The hack came a month after a disturbing rash of security breaches in which members' passwords were stolen from career-oriented social network LinkedIn as well as US dating website eHarmony and British-based music site Lastfm.com.

Security experts said in June that some 6.5 million LinkedIn accounts were posted to a Russian hacker forum.

Such data thefts are a bane to modern lifestyles that increasingly involve storing information and accessing services in the Internet "cloud."

Users of online accounts are urged by security experts and technology firms to select tough passwords and change them frequently to thwart hackers.