Digg will be making another round of layoffs, announced the struggling company’s CEO Matt Williams.  About 40 percent employees will be laidoff. Bringing the new head to 42 from 67. The company laid off 10 percent of its employees in May 2010.

According to Williams, Digg’s burn rate is simply too high, and the only way to reach profitability is to cut expenses.

Once high fling Digg turned a $100 million takeover offer from AOL, a $200 million takeover offer from Yahoo, and a $400 million takeover offer from Google hoping to sell for $1 billion. In the meantime, Web 2.0 died as did most of the buyers and competition increased. Now Digg is struggling to keep the lights on.

Below is the communication Williams send out to all employees.

“Team,

When I joined Digg six weeks ago, we set an immediate focus on improving the web site. We listened carefully to user feedback and started making changes to generate momentum in our business.

As I mentioned in one of our first all-hands meetings, another top priority was to take a hard look at the entire business, across product, sales, and operations. Through the time I have spent with each of you, I’ve been impressed by the commitment and enthusiasm you’ve shown. I’ve also learned a great deal about what is working well at Digg, and what is broken.

Many things are working well. The team is listening and acting quickly on the feedback from our passionate community. We’ve been able to deliver nimbly on the new platform, with over 100 bug and feature releases to the web site in the past two months. 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. The fact is our business has a burn rate that is too high. We must significantly cut our expenses to achieve profitability in 2011. We’ve considered all of the possible options for reduction, from salaries to fixed costs. The result is that, in addition to lowering many of our operational costs, I’ve made the decision to downsize our staff from 67 to 42 people.

It’s been an incredibly tough decision. I wish it weren’t necessary. However, I know it’s the right choice for Digg’s future success as a business. I’m personally committed to help find new opportunities for everyone affected by the transition. Digg’s Board members have also offered to help find placements within their portfolio companies.

Let’s please use today to show our sincere appreciation for our friends and colleagues who will be moving on. Tomorrow, we’ll go forward with a new strategy for Digg.

Matt”