CNN announced today that it's taking another step into the tablet world with the acquisition of Zite, the startup behind an iPad "magazine" that's personalized to each reader's tastes.
KC Estenson, senior vice president and general manager of CNN.com, said he first became acquainted with Zite as a user of the app, and grew interested in the company as a way to help CNN reach a new audience. People come to CNN.com when they want the latest breaking news, he said. By creating the equivalent of a digital newsstand, Estenson said Zite can reach readers "that other 90 percent of the time when there's not some breaking story." And by acquiring Zite, CNN is able to "leapfrog" into the market, rather than having to build an app on its own.
There are, of course, plenty of other iPad news apps, most famously Flipboard. Zite CEO Mark Johnson admitted that he has been a bit surprised by the hordes of competing apps, particularly because "there's not a lot of differentiation." The CNN acquisition should help Zite stand out, he said—and while Zite is "absolutely looking at generating revenue eventually," there's less pressure now to rush into running advertising in the app. Johnson compared his strategy to Google's a decade ago. Instead of just slapping random banner ads on its product, he added, Zite will focus on building the best technology and then introduce ads that are relevant.
"Rather than scrambling to monetize a small user base, we're going to create an incredible discovery engine that's really sticky," he said.
The biggest priority for Zite, which will run as an independent unit within CNN, is to move onto other mobile platforms, such as Android tablets. Beyond that, Johnson said he wants to "foster this dialogue between the user and the back-end," so that users are constantly giving Zite data about what kind of news they like to read, while getting information from Zite about why a story is being recommended. (Zite currently builds its initial news recommendations based on your accounts in Twitter and elsewhere; then you tune it by giving a thumbs up or thumbs down to each story.)
Johnson added that "distribution is the hard part" of launching an app, so the deal should also increase Zite's visibility. For starters, CNN can promote Zite through its mobile app (which has been downloaded 12 million times) and its website. At the same time, both Johnson and Estenson were adamant that Zite wouldn't favor CNN content.
AllThingsDigital reports that the acquisition, which was rumored to be in the works last week, was worth $20 million to $25 million. Zite had raised a total of $4 million from angel investors and grants from the Canadian government.