Flipboard buys Zite from CNN to quash a rival
Zite will fade away as a standalone app, as Flipboard folds the rival's recommendation tech into its own news reader.
Flipboard, the magazine-style news reading app, is buying competitor Zite from CNN, the companies announced Wednesday.
The deal includes an advertising partnership between CNN and Flipboard, which will phase out Zite as a standalone app while adding the Zite recommendation technology into the Flipboard app. The majority of the Zite team, sans CEO Mark Johnson, will join Flipboard.
Neither CNN nor Flipboard would discuss the financial details of the purchase. CNN's news team is reporting that the deal is worth $60 million, but a CNN spokesman said, "While we're not sharing the terms of the deal, the reported valuation is inaccurate." Additionally, Bloomberg reported that CNN is getting a stake in Flipboard instead of cash.
"We're going to integrate the technology into Flipboard in the coming months," Flipboard CEO Mike McCue said during a press call Wednesday. "We do not plan to continue to evolve Zite, we think we should focus on a single product."
He added that Zite users will be able to use their logins to set up a new Flipboard account, and that Flipboard will continue to support Zite for the time it takes to complete the integration of its technology.
Flipboard and Zite's current user numbers are unclear. McCue did say that the Flipboard is adding 250,000 new readers each day, and Zite will accelerate Flipboard's growth.
KC Estenson, general manager of CNN Digital, said Zite's user numbers were "smaller than Flipboard by a decent number, but its power is in its technology."
CNN purchased Zite in 2011 in hopes of strengthening its presence in mobile and riding the trend of news aggregation.
When asked if CNN was concerned about Zite cannibalizing its traffic, Estenson replied that CNN has over 80 million unique visitors a month.
"We're honestly not that worried about losing traffic," he said. "I think anything this extends the ecology of CNN."
McCue said the advertising partnership, which the companies described as "long-term," means that CNN and Flipboard will be "jointly selling these ads together to really big brands."
In addition to the mobile advertising sales, Flipboard will deliver CNN's content through its magazines, including three new magazines by CNN journalists Fareed Zakaria, Jake Tapper, and John King.
Flipboard has been rapidly expanding its product line. In November, it moved into mobile e-commerce by adding the ability to create product catalogs of purchasable items found on Flipboard and on the Web. In March, the company added the ability for users to create their own digital magazines. In July, it moved onto the desktop as well, expanding its platforms and McCue talked about how much more effective Flipboard advertising is compared to traditional media advertising.
The company raises $50 million from investors in September, giving it an $800 million valuation.
Johnson, Zite's CEO, wrote in a LinkedIn post that he didn't want to join Flipboard because he'd like to do another startup. He wished the new merger success.
"The combination of our two teams is going to be an epic force," Johnson wrote. "Zite has a small but stellar team with expertise in building a discovery engine and an interface to harness the full power of that engine. With Flipboard, Zite's technology finds a distribution megaphone of more than a hundred million users worldwide."
Update, 1:31 p.m. PT: Adds news report from Bloomberg and comment from Zite CEO Mark Johnson.