I think the time is right to launch a site that is similar to Digg / Reddit but stays close to Digg's original ethos of catering toward tech.
I wouldn't compete against Digg directly. Digg is too mainstream. The good news is that they get lots of traffic due to branching out, but it has its bad sides as well. The discussion/comments on Digg aren't very interesting and the quality of the submissions have gone down.
I'd like to cater to the geek/tech niche. I wouldnt produce a Digg clone but rather roll my own software and try to differentiate as much as I can.
My question to you is does this sound like a decent idea or is it dead in the water?
Also, what features would you like to see that could help differentiate the site from Digg?
It is a long shot, there are already very well known successful sites that cater to the geek/tech niche... hacker news and DotNetKicks for example. Also, Digg is loosing some of its users to Twitter, Digg is having a hard time (IMO) keeping up with Twitter, which is faster it seems than Digg about delivering the news you are interested on...
Whatever it is you do, just do it, but I will suggest you create something that relieves pain, a solution that will resolve an existing problem, something unique that you have not seen out there.
This is the wrong way to approach entrepreneurship. You don't find a competitor and then ask others how you can beat them. You find something you do better than anyone else, and then implement it better than any competitors out there.
Your approach is very similar to someone walking up to you on the street and saying "I've got a great idea, I'd like to cure cancer, can you tell me what ways you can think of to cure it?"
I'm with Ricardo on this one. Seems like an exceptionally crowded market with low barriers to entry.
It's a tempting category, because it'd likely be fun to write but I think it'd be tough to build something that would attract a significant user base.
Go for it. Big problems are always where the most potential is.
That being said... it will be extremely hard. Building communities from scratch, with the right culture, is an art. Don't expect that because you thought of slightly better game mechanics or your vote buttons are more interactive, it will make a difference. It won't.
That being said: go for it, just don't spend too much time coding before you ship something. What you focus on generally for these very broad projects, has nothing to do with what users will tell you the day you launch.