I came across ximmy.com which is a new social news site similar to digg.com. However, they are paying users to participate on their site. Is this a good marketing idea?
No. Webmasters who don't know what they are doing do that. Just like with message boards. On something like this many of the visitors will do it on their own. ... Along with the Webmasters of that site submitting stuff on their own. That money should be put towards advertising, or more advertising, which brings in the visitors, so they can submit stuff on their own.
I don't see a revenue stream from that. It doesn't make a lot of sense. Especially for a digg type site! Those things are literally traffic magnets from people trying to promote their sites!
Digg like voting sites have the risk of becoming an ad boards but proper marketing to show what is really the use of the site and finding some authority users to use the site is essential of turning the site into something like Digg.
Other than digg, this may also work to drive traffic. http://shoutwire.com http://www.propeller.com http://newsweight.com