Flipboard Gets Its Hands on Zite

Zite has traded hands again, three years after CNN bought it for US$20 million.

Flipboard now is acquiring the service, CNN reported, initially pegging the new sale price at $60 million. It later backed away from that figure, calling it “inaccurate.”

The transaction is a multi-stage deal in which CNN gains an equity stake in Flipboard, according to unnamed sources.

Whatever its current valuation is, Zite is almost unrecognizable from its early days as a news aggregator that customized feeds based on a user’s Twitter and Google Reader activity.

In the three years that Zite has been at CNN, the company “tripled the size of the team, redesigned Zite from the ground up, improved the underlying discovery technology, expanded from iPad to iPhone and Android, experimented with wearables, inked deals with dozens of publishers, booked revenue, built an integration to CNN all while building the best mobile discovery experience,” said CEO Mark Johnson in a post on LinkedIn.

Discovery Engine Plus Huge Audience

Under the auspices of Flipboard, the progress will continue. Zite plans to leverage its skills in building a discovery engine and an interface that will marry it to Flipboard’s “distribution megaphone” of more than a hundred million users, Johnson wrote.

Johnson won’t be joining the company, as he wants to work on a startup.

The deal is a plum for Flipboard, another content aggregation app that has morphed far beyond the functionality of its early days. Over the course of half a year it has added some 15 million users as it incorporated content from Vogue and others, and redesigned the layout of the articles.

The site’s fare now includes Bon Apptit, Glamour, Golf Digest, The New York Times, Forbes, Esquire and Lonely Planet.

CNN also has been part of the mix, but it appears as though its distribution will expand under the new agreement.

“By tapping their expertise, we will create new revenue opportunities and expand CNN’s already-massive mobile audience,” said KC Estenson, SVP & GM of CNN Digital.

Where Flipboard will really benefit, though, will be from Zite’s data science creds and personalized recommendation algorithms, Farbood Nivi, founder of Learnist, told the E-Commerce Times. “Surfacing info to the right person at the right time is more important than having lots of information available,” he said.

New Competition

The deal comes at an interesting time for this particular online content niche as Facebook recently launched Paper, a competing service.

On one hand, that is good news for Zite and Flipboard, Rich Hanley, associate professor and director of the graduate journalism program at Quinnipiac University, told the E-Commerce Times.

“That keeps values buoyant in this sector. The deal is bound to amplify the action in this area and lead to a quickening pace of developments in the area of news aggregation and publishing via apps,” he said.

Clearly, users’ tastes are fast-moving in this area, and existing providers will have to scramble to keep up. One reason CNN likely decided to sell Zite was because of Paper, Hanley speculated.

“Facebook’s Paper catalyzed the market and pointed to a fresh method of consuming news and information,” he said. “Flipboard’s acquisition underscores its need to secure its standing in the news app sector against Paper and LinkedIn’s Pulse.”

Erika Morphy has been writing about technology, finance and business issues for more than 20 years. She lives in Silver Spring, Md.

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