It’s just past noon on March 30, 2011. The entire executive team from Zite is at the Sharon Heights Starbucks in Menlo Park—the usual hangout for entrepreneurs making the venture circuit. They’re killing time between VC meetings on Sand Hill Road, and they’re a little nervous. But it’s not because of the meetings, or the coffee. It’s because of what they’ve just received in their e-mail: a cease-and-desist letter from a posse of 11 media giants—including Dow Jones, the Associated Press, Time Inc., and the Washington Post—whose content occasionally shows up in Zite’s personalized news reader app.
It’s only been three weeks since the launch of Zite’s iPad app, which has already acquired more than 125,000 users. But the C&D letter threatens to put a crimp in the Vancouver-based company’s growth, and in its fundraising efforts. The media companies charge that Zite’s app “damages our business by misappropriating our intellectual property” and demand that the startup stop using their content. Without articles from these organizations and their 300 newspaper and magazine properties, Zite would start to look thin indeed.
Half an hour ticks by. Just when it looks like things can’t get any worse, a leaked copy of the C&D shows up on AllThingsD, the Dow Jones-owned tech blog. Kara Swisher, the reporter with the scoop, calls the letter “legally lethal.” The team’s dismay level ratchets up a few bars. “We hadn’t even had time to digest it,” recalls Mark Johnson, an advisor to the company who would shortly become its CEO. “And we were like, ‘Sh-t, we are going to have to go into the next meeting'” with a well-publicized legal storm hanging overhead.
The team troops off to its meeting. But then something surprising happens: the C&D letter turns out to be a badge of honor. “The VCs were kind of chummy about it,” Johnson says. “They said, ‘If the big publishers are angry at you, I guess you guys have made it.'”
That soon turns out to be literally true. Over the next few months, the startup figures out how to mollify its media critics by changing the way the app displays their stories (it switches to a full Web view rather than a stripped-down reading view, sans ads). And just five months after the VC meetings, Zite gets snapped up by Atlanta-based CNN. These days, if anybody is still upset with Zite, they’ll have to take it up with CNN or its parent company, a little outfit called Time Warner.
Zite’s brief clash with the media establishment, followed by its swift assimilation into the same establishment, is emblematic of a larger story unfolding in the publishing business. Call it Aggregation Aggravation. Old-line media companies have spent the last 25 years coping with the digital fragmentation of their content, starting with CompuServe and AOL in the 1980s and exploding in recent years across the Web, RSS, Google News, Flickr, YouTube, Facebook, Twitter, Tumblr, and all the rest. Just as they’ve started to figure out how to make money in this radically altered world—not as much as they did in the print era, but something above zero— a new technology trend comes knocking: apps like Zite, Flipboard, and Pulse that hoover up publishers’ content fragments and put them back together in the form of tablet- and smartphone-based “magazines.” (See “The 10 Social News Apps You Need to Try,” 1/20/12.)
These apps typically use social or AI-driven curation to harvest a personalized mix of articles for each user. And they adhere to a minimalist design ethic under which the “extraneous” material on a publishers’ website—that is, advertising—is stripped away in the name of providing a more comfortable reading experience. Of course, the publishers’ initial, entirely predictable reaction was to cry copyright and trademark infringement and fire off the C&Ds. But now some publishers seem to be coming around to the aggregators’ point of view. And while the transition is a halting, muddled, incomplete one, it’s moving along much faster than previous media-business skirmishes (just compare it to RIAA vs Napster, or ABC, NBC, and CBS vs ReplayTV). “Frankly, as soon as we got those [cease-and-desist] letters we also got calls from publishers saying, ‘Hey, how do we work together,'” says Johnson. “At the end of the day, publishers realize that we offer something really unique. We are a discovery engine. We help people to find content they wouldn’t otherwise have read.”
Zite didn’t actually set out to disrupt the publishing industry. In 2005, it was spun off from the Laboratory for Computational Intelligence at the University of British Columbia in Vancouver as Worio—for “Web Of Research, Iteration One.” As that geeky name suggests, Worio offered a tool for
