CNN

Flipboard buys Zite news app from CNN

March 5, 2014: 1:27 PM ET

The standalone iPad news app will eventually be shut down and integrated into Flipboard. Also: Zite's CEO tells Fortune why he left.

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FORTUNE -- Aggregation startup Flipboard is acquiring competing iPad news app Zite from its current owner CNN.

According to a person familiar with the situation, the deal was an all-stock transaction for Zite. Another source confirmed that the stock value Flipboard paid for Zite is currently valued at more than the price CNN paid when it purchased the company for just north of $20 million in 2011. Neither Flipboard nor CNN would comment on the purchase price.

During a press call held Wednesday, Flipboard and CNN announced the deal, which includes the app and most -- but not all -- of Zite's 14 employees. The only Zite employee not making the transition is CEO Mark Johnson, a former Microsoft (MSFT) senior product manager who has served in the chief executive role since 2011. According to Flipboard CEO Mike McCue, he and Johnson discussed a possible role at Flipboard post-acquisition but reached a mutual agreement instead that Johnson would go his own, separate way.

Johnson, whose last day with Zite was last Friday, tells Fortune he's already enjoying "funemployment" and plans to travel to locales as far-flung as Croatia and Slovenia, partly to mull over his next move. Johnson says he is keen on exploring Bitcoin, robotics, and artificial intelligence, three disparate-seeming topics, he admits, and hopes they play a role in his next venture. "I've worked for four different startups -- all four of which have been sold -- but I've never started one myself from the ground up," he says. "I really felt this was the right time to go do this and that my team was strong enough.

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As for Zite? One of the reasons Zite agreed to the acquisition had to do with distribution. While CNN provided valuable access to areas like Human Resources and legal, Johnson says one of the things he originally expected would help boost Zite's usersbase was the CNN brand and ecosystem. But Zite didn't experience the kind of traffic bump Johnson and crew had expected. Johnson revealed in his well-timed post that Zite's team has tripled in size since its CNN acquisition, redesigned the app, expanded onto iPhone and Android and inked deals with dozens of publishers. Neither Flipboard nor CNN would specify how many users Zite has, but a Flipboard spokesperson did suggest Zite's user base was smaller than Flipboard's 100 million-plus. "Zite's value is in the technology," the spokesperson said.

According to Flipboard CTO Eric Feng, the company intends to integrate Zite's algorithm-driven curation directly into its own product, a process that company will focus on in the coming months. Eventually, Zite as a standalone app experience will be shut down once Flipboard has integrated more Zite features. "We think we should focus on a single product," said McCue.

During the announcement, Flipboard and CNN also discussed a new partnership whereby the news network's reporting, video, and photography can be found in in Flipboard's News, Entertainment, Technology, and Business sections. Virtual, curated magazines will include "Fareed Zakaria's GPS Daily," "The Lead with Jake Tapper," and "John King's Go 'Inside Politics," available this week. The two also announced a mobile ad partnership where CNN and Flipboard will be jointly selling ads for the CNN content. Summed up McCue: "Our goal is for people to continue to discover great new content created by folks now like CNN, Conde, Hearst, and many, many others."

Dan Primack contributed reporting.

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