The Inside Story of Flipboard, the App That Makes Digital Content Look Magazine Glossy
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Mike McCue thought he was done. Two years after selling his startup Tellme Networks to Microsoft for a reported $800 million-plus, McCue essentially completed his efforts to integrate the company's innovative voice-recognition software into the Microsoft platform. So in mid-2009 he handed over the reins, turned in his resignation and set his sights on a life of leisure--maybe the occasional angel investment here, perhaps some philanthropy work there, a whole lot of family time in between.
His retirement lasted barely a week. En route to a family vacation, he grabbed a magazine from the plane's seat-back pocket and turned the page. "I remember thinking to myself, 'I read this same article on the internet, and it looked nothing as good as it does here in print, with awesome graphics, pullout quotes, inset maps and beautiful full-bleed photography,'" McCue recalls. "The advertising was also a shadow of itself in digital. In print, you have these full-page ads that people actually view as part of the content. You'd never think about buying Vogue without the ads, right? But banner ads just get in the way of content. Nobody likes them. I started to realize there was this whole opportunity to reform how content and advertising is presented on the web."
Retirement would have to wait. McCue began sketching ideas. He recruited Evan Doll, an early Apple iPhone engineer, to help him translate the fundamentals of print publishing to the digital platform. The end result: Flipboard, arguably the first and most enduring killer app for Apple's iPad tablet.
Launched in July 2010, just months after the iPad reached retail, Flipboard effectively reinvented print periodicals for the tablet form factor, aggregating content from a vast range of publishers, news sources and social networks to create touchscreen-enabled, swipe-friendly personalized magazines bolstered by a growing arsenal of customization tools, multimedia features and sharing options. The free Flipboard app also spearheaded a revolution in digital advertising, introducing full-page, click-through ads that emphasize both design sophistication and reader relevance.
Four years after hitting Apple's App Store, Flipboard boasts more than 100 million active readers and adds 250,000 to 300,000 users every day. The company touts direct partnerships with more than 8,000 publishers. In late 2013 Flipboard completed a Series C round that boosted total financing to $161 million and hiked its valuation to a reported $800 million.
"Entrepreneurs are good at spotting opportunity. With Flipboard, I saw this incredible opportunity to take a look at the world of mobile and social, two very powerful trends that are changing everything we know about the web," says McCue, who serves as CEO of the Palo Alto, Calif.-based company. "It was an opportunity to reform the web and make it even better by changing the way content is presented, how it's discovered, how it's packaged, how it's distributed and how it's monetized."
Launch, Sell, Repeat
Decades before McCue set about redefining magazines, he was a tech-obsessed teen just trying to get his name printed in one. The upstate New York native spent his formative years copying video game code out of computing publications and teaching himself to program software, hitting pay dirt with Jungle Jim--his homage to Activision's classic adventure Pitfall--which he licensed to 99'er magazine for the sum of $50.
"It was my dream to get a game in one of those magazines," McCue says. "That was the very first time I ever made money from programming."
His first startup attempt, M-Cubed Software, never made it, so instead of attending college he spent close to four years as a programmer at IBM before founding Woodstock, N.Y.-based Paper Software in 1989. Paper dedicated roughly three years to developing Sidebar, a set of icons positioned along the side of the PC screen designed to simplify the user experience, with McCue supporting the company in lean times by taking on construction and software-consulting gigs.
With Sidebar poised for commercial release, McCue stumbled across a magazine review of a competing solution, Symantec's Norton Desktop. "It completely trumped our product, even before we shipped it," McCue sighs. "I remember walking out to the back porch of my apartment, looking out at the mountains and thinking, We have to swallow hard and either give up or press on. We decided to still ship [Sidebar] and reposition it, focusing on a less-is-more approach and doing a few things really well. Had I given up, a lot of amazing things never would have happened."
While the streamlined Sidebar enjoyed moderate success, Paper Software shifted gears and built WebFX, a virtual-reality modeling language plug-in that allowed Netscape's Navigator web browser to support more complex graphics. "Mike had basically reverse-hacked Netscape's browser and built a plug-in enabling you to browse in 3-D," explains venture capitalist Danny Rimer, at that time an analyst with Hambrecht & Quist, the San Francisco investment bank that helped take Netscape public. "I got in touch with him and was blown away. So I introduced him to Netscape, which ended up buying his company."
Netscape acquired Paper Software in early 1996 for an estimated $20 million, and McCue relocated to Silicon Valley. He exited three years later when AOL acquired Netscape for a reported $4.2 billion.
In 1999 McCue launched Tellme Networks with former Netscape employee Angus Davis. The firm's software let callers communicate with clients' servers by translating voice commands into the VoiceXML digital document standard, supporting everything from nationwide directory assistance to enterprise customer service to voice-enabled mobile search for clients that include American Airlines, FedEx, Fandango and Verizon Wireless.
By 2005, more than 35 million Americans per month were making calls through the Tellme network, and annual revenue topped $100 million. The firm attracted more than $235 million in venture funding from investors like Kleiner Perkins Caufield & Byers, Benchmark, The Barksdale Group and Rimer, who by this time was a partner at Index Ventures, a position he still holds.
"Regardless of what Mike wanted to do after [Paper Software], I would have invested," Rimer says. "Mike is one of the best examples of what an entrepreneur should be in my business. He's passionate, he's laser-focused and he wants to change the world."
Microsoft snapped up Tellme in March 2007, with McCue transitioning from CEO to GM. By the time he exited, the Tellme software was an integral component of Microsoft products including Live Search (now Bing), the Ford Sync in-vehicle communications and entertainment system and the Windows Mobile operating system (now Windows Phone).
"I was comfortable moving on," McCue says. "I thought that was it. But life is better when it's led with a sense of purpose. I've got four kids, and I like having them see their dad as somebody who moves forward, and not just some dude who's retired. When I met Evan Doll, I realized I was going to start another company."
iPad Head Start
McCue and Doll first connected through an executive recruiter. At that time, Doll--a six-year veteran of Apple--was installed as an iPhone senior software engineer teaching the iOS development class at Stanford. He'd worked on the first three releases of the iconic smartphone.
"I was blown away by him," McCue says. "I felt, this is a guy that's way more than an engineer. He's the kind of guy who could be a co-founder. He has the sort of quality of judgment and thinking that goes way beyond being an engineer. In many ways, he reminded me of a younger version of myself."
Doll quit Apple within weeks of meeting McCue, and they began developing Flipboard in earnest. The founders initially conceived a user interface designed for the desktop but quickly scrapped that approach due to the complexity of navigating content on the conventional web.
"In the days and weeks leading up to the announcement of the iPad, we started having conversations in the office and asking ourselves, 'What if the first version of Flipboard was for that?'" Doll recalls. "It was a very risky thing to consider. We didn't know if anybody was going to buy an iPad, or if it was going to be a success or a failure in the marketplace. But new platforms only come along once in a blue moon, so we believed it might be something worth staking ourselves to."
But McCue and Doll didn't even know exactly what the iPad would look like, let alone what kind of user interface it would deliver. They operated under the largely correct assumption that the tablet would resemble a bigger, bolder iPhone or iPod touch, complete with touch-enabled navigation; that foresight shaped Flipboard's signature page-flip animations, which evoke the experience of browsing through a print magazine. At one point, Doll even created a paper iPad mock-up in an attempt to gain a greater understanding of the tablet's shape and feel.
Steve Jobs unveiled the iPad at a January 2010 media event. The Flipboard team downloaded the software development kit even before the Apple chief had left the stage, fine-tuning the parts of the code they had guessed correctly and scrapping the rest. "We ended up approximating it pretty well," McCue says. "That gave us a huge head start. Our designs and thinking were at least a year ahead of where other people were."
Calling itself "the world's first social magazine," Flipboard 1.0 brought together stories, photos, headlines and updates from across the Twitter and Facebook ecosystems. The app rendered links and images within the magazine, making it easy for users to discover, consume and share social content. Flipboard also let readers curate custom sections around their favorite subjects and hobbies; the app incorporated interstitial ads formatted to match the content and targeted for maximum audience relevance.
"We think the value of Flipboard is looking at what's going on in the world and what's trending, taking what we know about the user and their taste profile, and guiding readers to help inform them about where they should be spending their time and focusing their attention," Doll says. "We want to solve the problem of information overload, and that comes from understanding each reader extremely well."
Within hours of its debut, Flipboard topped the App Store's News category in all international markets that were selling the iPad; Apple ultimately named it iPad App of the Year for 2010. Flipboard is now available for other Apple devices, as well as products running Google's Android, Windows 8 and BlackBerry; there are versions of the app optimized for Amazon's Kindle Fire and Barnes & Noble's Nook. Along the way, the firm has inked content deals with media giants like Oprah Winfrey's OWN, Time Inc., Condé Nast, ESPN, Hearst and The New York Times Company.
"Mike has spent his career creating new paradigms for looking at and digesting information--that's what Paper was, that's what Tellme was, and that's what Flipboard is," says Rimer, who was Flipboard's first investor. "For me, it was never about a news reader. It was about disrupting the magazine industry and traditional ways of consuming information and creating something that is going to be pervasive and second nature to everyone as technology progresses."
The Modern Magazine
Flipboard isn't the only company making headlines in the news-application segment. News, Media and Entertainment is the third most popular app category across iOS and Android devices nationwide, trailing only gaming and social media, according to Simon Khalaf, president and CEO of San Francisco-based mobile app analytics and advertising firm Flurry.
The average U.S. consumer spends two hours and 19 minutes each day accessing mobile applications, up 9.5 percent year over year, Flurry reports; usage of news and magazine apps alone surged 31 percent in 2013.
"We see usage of news apps throughout the day," Khalaf adds. "Some news apps are accessed on an hourly basis." No less significant, news apps enjoy a longer life cycle than any other mobile category, Flurry reports.
That's all catnip to advertisers, Flipboard's sole source of revenue. ("I believe in having only one business model--just pick the best and largest," McCue proclaims.) Flipboard declined to disclose revenue but says that its full-page advertisements can sell for the equivalent of print ads, rather than at standard digital rates, which skew far lower. Cisco, Gucci, Levi's, Starbucks, Toyota and Volvo have all run Flipboard campaigns, with the firm reporting impressive click-through rates averaging 3 percent.
Flipboard's success isn't lost on the competition. Earlier this year Facebook launched Paper, a stand-alone news-reader app mirroring Flipboard in both concept and execution. Google offers its own Android-exclusive Google Play Newsstand, and smaller rivals like Circa and Trove are circling as well.
Flipboard is responding to the pressure by continuing to introduce features and services. In spring 2013 the company rolled out tools that allow readers to cull stories, videos, audio content and images to create do-it-yourself magazines devoted to any topic, event or personal interest, no matter how offbeat or obscure. Customized magazines can be private or public and shareable, supporting reader comments and interactions, and each item included in a digital publication retains attribution to the original content provider or social network.
Flipboard readers created close to 8 million magazines within the first 12 months. "We all like to feel like our actions have an impact on others," Doll says. "My grandmother used to clip out articles from the newspaper, attach little sticky notes to them and mail them to me, and my mom still forwards articles I might want to read. It's not just about the content in that case--it's about connecting with people and saying, 'I've been thinking about you, and I want to share this with you.'"
Flipboard followed with the launch of custom "shoppable" magazines with Pinterest-like creation tools that allow users to assemble wish lists, look books and gift guides from across the Flipboard shopping category or any e-commerce site, complete with purchase links, then share the results with friends and family. The initiative kicked off with catalogs assembled by brand partners Banana Republic, Birchbox, eBay, Fab and ModCloth. Flipboard does not collect a cut of any items sold via such catalogs but still claims its share of revenue from ads appearing alongside the products.
Flipboard continues to refine and enhance its core software as well. Earlier this year the company acquired personalized news application Zite from CNN, which purchased the app in 2011 for a reported $20 million-plus. (Terms of the Flipboard/CNN deal are unknown.) Zite's algorithm-driven discovery engine analyzes millions of articles each day across more than 40,000 topics, suggesting content based on users' interests and preferences; Flipboard is absorbing the Zite technology to improve its recommendation, personalization and search options.
"We've been struggling with how to get people to discover all these magazines," McCue admits. "Now we can create personalized recommendations for readers based on their interests. Zite is going to do some amazing things for us."
In tandem with the Zite deal, Flipboard signed on to add CNN's global content to the Flipboard app and create custom magazines for CNN personalities Fareed Zakaria, Jake Tapper and John King. McCue says Flipboard will court similar alliances with other personalities, celebrities and media outlets moving forward, additionally promising a host of technological innovations and improvements coming in the months ahead.
Looking beyond the short term, McCue says Flipboard will cap off his professional journey. And this time, he means it.
"This is my last startup," he vows. "I will be here for the rest of my career. We have a lot of people who love [Flipboard] and are very happy using it, but we're not even close to being satisfied with where it is now. There has to be an ecosystem that supports great content, and we believe that is our highest calling: to create that ecosystem for publishers and give them a mechanism for getting their content discovered by a new generation of readers, monetizing that content at levels that are more comparable to print and making it look beautiful for today's devices."