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Techcrunch is reporting that AOL’s Digg clone Propeller, which once sit on the Netscape.com domain, is under going a series of layoffs that would shrink it to a fraction of its former size. It has only been a couple of weeks since Propeller was moved to this domain.

The layoff axe would fall most heavily on the anchors and scouts, who actively monitor the site to hand pick the best submitted stories to ensure the quality of the site. This in a way was a hybrid between user generated content and traditional media.

According to Techcrunch, the layoffs were long expected ever since AOL’s budget cuts were passed onto Propeller. Propeller’s management decided to downsize the organization instead of giving themselves a pay cut.

The people who are now being laid off were claimed to be the ones that differentiate Propeller from Digg and give it the competitive edge, since Propeller subscribed to a school that didn’t believed in the wisdom of the crowds. Digg on the other hand dont have an editorial team, although we know alot about its bury brigade. By downsizing the editorial team Propeller has transformed itself into a Digg clone, and we all know it well that Digg clones have suffered a common faith of slowly moving into oblivion.

Propeller’s program manager has responded to all this by saying:

Well, as Propeller’s Programming Manager and the one who runs the aforementioned Scout team, I can say these reports are being blown a little out of proportion. We did let a few Scouts go, but it was 4 out of about 35, so that fraction we were reduced to is roughly 9/10ths.