In July 2010, Akshay Kothari and Ankit Gupta got an invitation to dine with Rupert Murdoch at his ranch in Carmel, Calif. The pair had just graduated from masters programs at Stanford University and a few months earlier released Pulse, a news-reader app for the iPad. It immediately earned raves, including an onstage mention from Steve Jobs during a conference. When Kothari and Gupta showed up at the dinner, which Jobs also attended, “we didn’t know much about Rupert Murdoch or the industry,” says Kothari. They were nonetheless persuasive enough about Pulse’s potential that several Murdoch media companies, including Fox News, started making their content available through Pulse.
The smartphone app now has 13 million users, with more than 1.5 million new ones joining each month. It’s one of the few default apps installed on Amazon.com’s (AMZN) Kindle Fire, and Pulse has partnerships with over 250 publishers (including Bloomberg Businessweek). There are now a multitude of mobile apps that aggregate news from various publications and present articles and blog posts in a reader-friendly format, including readers from Google (GOOG) and Yahoo! (YAHOO) and a popular app from Flipboard, which mimics the feel of turning a printed page. Pulse is the current champ. “This company could be the next significant media company,” says Patrick Chung, a partner at NEA, one of the investors that put more than $10 million into Pulse, with the latest round closed last June.
Now the 20-person startup behind Pulse, Alphonso Labs (named after the sweet mango grown in the co-founders’ native India), hopes to stay ahead of the competition by going local. Beginning March 9, Pulse will start integrating neighborhood news and local information from publications including AOL’s (AOL) Patch, CBS Local, and community sites such as Bold Italic in San Francisco. At the same time, Pulse will begin featuring daily deals from local merchants, courtesy of Groupon (GRPN), LivingSocial, and Gilt Groupe. “The opportunity is to become a person’s city guide,” Kothari says. Just as it does with articles from major publications, Pulse will display each local news story or deal as a colorful tile, and arrange them in horizontal rows for easy navigating.
Pulse says the local news sites that participate will benefit from the extra traffic and exposure to millions of new users. “It’s definitely a way we see of growing and expanding our audience,” says Chris Appelgren, marketing lead at Bold Italic, whose San Francisco-focused stories attract 85,000 unique visitors a month.
For Pulse, it’s also a step toward making money. Pulse is considering allowing users to sign up for subscription content and taking a cut of each sale. The startup will also get a percentage of every daily deal sold, though it won’t reveal its percentage.
Kothari says this is better than relying on the intrusive banner ads that dominate publishing companies’ websites. Inevitably, though, Pulse will feature some advertising. The company has been experimenting with so-called branded-content advertising, stories and videos that get slotted into the same flow as news content. Lexus (TM) recently bought space for a 2 ½-minute video explaining the innovations in its cars. (Kothari would not reveal how much Lexus paid.) Spending on ads placed in mobile apps will rise from $1.25 billion last year to $21.2 billion in 2016, according to ad consultancy Borrell Associates. The new push into local content will also give Pulse a better idea of a user’s location and help advertisers geo-target users.
This quarter, Pulse will also make a more aggressive push abroad. The app is already available in eight languages and about a third of Pulse’s users come from outside the U.S., though only about 10 percent of its publishing partners are based abroad. By the end of the year, Kothari says, that number could be as high as 50 percent. He’s planning to hire a staffer focused on recruiting international publishers.
Those plans won’t deter the competition. Flipboard’s user base more than doubled in the last few months after releasing its first iPhone app, and on Feb. 29 it debuted a French-language version. “Journalism is getting reinvented,” says Flipboard co-founder Evan Doll. “We don’t see it as a winner-take-all game.”