In July a tiny Palo Alto (Calif.) startup called Flipboard stirred up the tech world with an application for Apple's (AAPL) iPad that promised to change the way Internet users discover and read online news. The app, which is free to download, asks users to enter their Facebook or Twitter account information and favorite publications. Then it pulls in all the relevant links to news articles, blog items, and photographs streaming through those social-networking feeds and displays the content in a visually appealing, easy-to-navigate format evocative of a traditional magazine.
iPad owners and the Internet cognoscenti immediately turned the innovative little program into one of the top-rated free news apps for the iPad. The startup's servers were overloaded for much of its first week.
Despite its fresh approach, Flipboard, like other so-called news aggregators that allow Internet users to collect articles from different sources across the Web and present them in one location, seemed to have the same old attitude toward media company content. It had no agreements with media companies but helped itself to headlines and the first few sentences of a story, then linked to that publication's Web page. Now the startup is changing its approach. As of press time, Flipboard planned to announce on Dec. 2 partnerships with eight media outlets, including The Washington Post, ABC News (DIS), Condé Nast's Bon Appétit, and All Things Digital, a technology blog owned by The Wall Street Journal.
Under these deals, Flipboard will be able to present entire articles from those news sources inside its application, without sending readers off to the Web. The company will also begin experimenting with full-screen, magazine-style advertising, which Flipboard hopes will generate big revenues for the media companies—and itself. "We are focused on working with publishers to help them present their content in a way that is much more beautiful and easy to read, and ultimately more monetizable" than their own Web sites, says Mike McCue, Flipboard's chief executive officer. McCue was an early executive at Netscape and the founder of Tellme, a voice-recognition company acquired by Microsoft (MSFT) in 2007.
Flipboard, backed by $10.5 million from investors including venture capital firm Kleiner Perkins Caufield & Byers, has developed some technological magic to make these arrangements work. Its application takes articles off the media companies' websites and reformats them in a visually dynamic Web language called HTML 5, automatically wrapping text around photos, blowing up quotations in big type, and allowing readers to move from one page to the next with the swipe of a finger. Flipboard also strips out all those easily ignored Web ads, which yield little revenue. Instead, it has contracted with OMD, a unit of media giant Omnicom Group, to insert into each article one or two full-screen ads that aim to evoke the same emotional response as a full-page pitch in a glossy magazine. Although Flipboard's obvious opportunity is to take a slice of these revenues, McCue says it's too early to talk about whether Flipboard or the content companies will ultimately sell these ads—or how revenues will be divided. For now it's all an experiment to see whether the format is successful at getting users to read and share long articles, and to pay more attention to ads.
Media executives have been wary of news aggregators. These tools, like Google Reader, Netvibes.com, and the popular Pulse News Reader for the iPad and iPhone, can send a wave of new visitors to a publication's website. However, over time they can siphon away loyal readers. Executives at companies working with Flipboard express varying degrees of enthusiasm about McCue and his startup. "Flipboard is one of those ideas that everyone looks at and says, damn, why didn't I do that?" says John Boris, an executive vice-president at Lonely Planet, the travel publishing company and one of the eight partners. "It makes content that is challenging easily digestible."
Other media companies are focusing efforts on their own iPad apps. Flipboard says it is talking to Time Inc.'s (TWX) Sports Illustrated, but the magazine is not yet one of its content partners. And The Washington Post is providing only stories from its Sunday magazine, which isn't available in the newspaper's own iPad app. Partnering with Flipboard is, in a sense, a way to hedge bets. "It's an experiment," says Raju Narisetti, managing editor of The Post. "It isn't like we have a clear, established road map. Nobody does."
The bottom line: Flipboard, which makes a news aggregator app for the iPad, is striking partnerships with media companies.