Is Digg headed for an early grave?

Digg, the news-sharing site once one of the hottest destinations on the Web, announced on Monday it was cutting over one-third of its staff in a bid to try to be profitable next year.

Matt Williams, who took over as chief executive of Digg.com six weeks ago, said the San Francisco-based start-up was slashing its staff from 67 employees to 42.

“The fact is our business has a burn rate that is too high,” Williams said in a memo to staff posted on the Digg website. “We must significantly cut our expenses to achieve profitability in 2011.”

Digg users submit stories to the site and items are ranked by popularity or interest. Many leading news websites provide a link asking readers whether they want to “Digg” a story.

Williams said his top priority since becoming CEO of Digg, which was founded by Web entrepreneur Kevin Rose in 2004, was taking a “hard look at the entire business, across product, sales, and operations.”

“Many things are working well,” he said. “Our Diggable ads product has seen a notable increase in use by advertisers and clicks by users.”

“Unfortunately, to reach our goals, we have to take some difficult steps,” Williams said, adding that the move to reduce staff has been “an incredibly tough decision.”

“I wish it weren’t necessary,” he said. “However, I know it’s the right choice for Digg’s future success as a business.”

Williams took over the reins at Digg after a revamp of the website in August met with a poor reception from members of the Digg community.

In a blog post earlier this month, the new CEO apologised for upsetting Digg users and rolled back a number of the more unpopular changes.

According to Williams, Digg had 23 million unique visitors in September. According to Alexa the site is ranked 71 in the US, and 120 worldwide.

The cutbacks announced on Monday come two years after Digg announced major expansion plans that were to have seen the company increase its staff to more than 150 employees.