Whether it's overkill or not depends entirely on what the servers are being used for. Without actually working there it's hard for one to say for sure.

We know what the service does. We have that much data - we can see what users are allowed to do on the website, and what they cannot do.

And for the level of content, interactivity, media, etc etc, I can say that 500 is silly.

You don't know what each server is doing. They might have 10 servers being used by an internal marketing analytics team, with 40 support servers for development, QA, testing, and disaster recovery of those specific services.

What sort of computing resources do you think it took for Google to develop the autopilot car? Would you have been able to determine that by looking at their homepage and the services they provide? No. That's the point. I'm not suggesting that Digg is doing anything so interesting, but most of those 500 servers are almost certainly NOT being used to support their website directly, they're being used by the business for other things.