CNN buys Zite, its ticket into the hot news app market

The iPad news apps market was already heating up, now CNN’s acquisition of Canadian start-up Zite shows just how hot the market is. CNN didn’t reveal how much it paid, but reports suggest the price was between $20m to $25m. The market is crowded: Zite is one of a number of news apps for tablets and smartphones. Yahoo has Livestand, AOL has Editions, and news app darling Flipboard closed a $50m round in funding in April, valuing the company at $200m. Investors included US cable giant Comcast’s venture fund. The market is hot because according to recent research from apps data company Localytics iPad users spend the most time with games and news apps. [caption id=“attachment_73708” align=“alignleft” width=“300” caption=“CNN has bought news app Zite”]  [/caption] Zite is a clever app that analyses your tweets and Google Reader subscriptions. It learns what you like by analysing the stories you read and allowing you to refine the content delivered to you. It also allows you to share stories via your social networks and save them for later reading. The app uses technology developed at the University of British Columbia. Knowlton Thomas at TechVibes, a Canadian tech news site that first reported news of the deal eight days ago, said, “the company has been a poster boy for government programs with grants from Canada’s National Research Council and PRECARN.” In March, media giants including the Associated Press, the Washington Post and Getty Images, expressed how displeased they were about how Zite aggregated their content, by sending a cease-and-desist letter to the start-up. Their complaint centred on the fact that their pages were being displayed in the Zite app without their ads. Zite worked with the companies to resolve the problem, and some analysts said that, by making peace with content creators, Zite opened the way for the acquisition. In a statement, KC Estenson, general manager of CNN Digital, said, “We think we can advance the industry in a meaningful way that helps content creators expand their businesses while growing the distribution of a product that people already love.” Mark Johnson, CEO of Zite, will continue to run the company’s day-to-day operations. He said, “In CNN, we have found a partner who shares our vision and passion.” CNN isn’t the only media company in the news app business. URL shortener Bit.ly worked with the New York Times R&D lab to develop News.me. Following the New York Times paid content strategy, the app has a paid content model - 99 cents a week for access - and licences content from a range of content creators including the Associated Press, blog network Gawker, The Guardian and Al Jazeera. Can Zite continue to innovate? The reaction in digital and social media circles was quick and sceptical. Mathew Ingram, who covers social and digital media for GigaOm, said on Twitter:

happy for the folks at Zite, assuming they got a good deal from CNN, but would rather have seen them stay independent

Referring to a Zite competitor, Marshall Kirkpatrick of digital media site ReadWriteWeb said, “hands off my Flipboard, old media!” Digital entrepreneur Ben Metcalfe said of the deal, “hear that? It’s the sound of innovation dying.” By staying separate, Zite may manage not to fall victim to a stifling corporate environment, but one thing is sure: They will need to stay nimble to keep ahead in this crowded pack of apps.