According to ZenithOptimedia, the global ad expenditure will reach $579 billion by the end of 2016. Internet advertising is one of the fastest growing advertising media: it has risen from 6% share in 2005 to 29.5% share in 2015 and is expected to attract 37.6% of global ad spend by 2018. This comes at the expense of print media. Newspapers’ share of global spend has fallen from 29% to 13%, while magazines’ has fallen from 13% to 6% and by 2018 newspapers and magazines are expected to end with 10% and 5% market share, respectively.
Palo Alto-based Flipboard was founded in 2010 by CEO Mike McCue and Evan Doll. It piggybacked on the rising popularity of iPads and with its magazine-like layout, it promised to duplicate the print experience in the web format. Today, it has tie-ups with over 800,000 publishing partners that let them share content and has about 90 million monthly active users.
Further, its magazine-like experience allows it to charge print rates for digital ads which are significantly more expensive than traditional banner ads. It is pushing advertisement revenues through sale of full-page ads, and more recently, video ads. Full-page ads are similar to magazine ads as they neither compete with content nor appear as distractions in the form of links and flashing ads on the page. It also launched video advertising which lets users see video and audio full-page ads for select brands like Gucci, Lufthansa, and Chrysler.
However, the increasing competition and the growing importance of social networks like Facebook and Twitter as the source of news are a cause for worry and advertising rates are declining. Last year, Apple also unveiled its own news-reading app for its devices. Flipboard allows integration of content from social media including Facebook and Twitter to let people share information outside of Flipboard.
Recently, Flipboard also lost some of its top management personnel, including co-founder Evan Doll, CTO Eric Feng, head of product Eugene Wei, CFO Jeff McCombs, and the head of advertising and monetization product Dave Huynh.
Flipboard does not disclose any of its financials. It earns revenues by taking a share of the publishers’ ad revenues as well as by selling advertisements. Some reports suggest revenue of $25 million to $30 million in 2015. Twitter was supposedly in talks last year to acquire the company for $1 billion, but the management shakeup stalled the talks.
Flipboard has been venture funded so far with $210.5 million raised from investors including JP Morgan Chase, GGV Capital, Insight Venture Partners, Kleiner Perkins Caufield & Byers, Index Ventures, Rizvi Traverse Management, Goldman Sachs, Suhail Rizvi, Comcast Interactive Capital, Jack Dorsey, Ron Conway, Dustin Moskovitz, Peter Currie, and Quincy Smith. Their last round of funding was held in July 2015 when they raised $50 million at a valuation of $800 million. Flipboard has maintained a flat valuation in the recent round to rope in credible investors like JP Morgan Chase. An earlier round in 2013 had also valued them at $800 million while in 2011, it was valued at $200 million.
Flipboard has pretty poor monetization given how much investment has gone into the company. It now plans to focus on profitability and being a self-sustained company.