Not how I remember it at all. At that time Digg was quite a bit larger than Reddit. Then later Digg decided to really push the revenue generation, and users fled to the obvious free alternative.
It's always tragic when the profit motive gets in the way of making good products that people want to use. Like in the case of Apple and the way it has made it impossible for them to make great products. Oh wait.
Digg wanted to make money.
If Conde hadn't bought Reddit, then it would likely have been a far closer race.
When your competition isn't interested in making money, you're always going to be at a major disadvantage.