Flipboard Is Buying Zite From CNN In A Deal Valued Up To $60M, After CNN Bought It For Around $20M 3 Years Ago

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This just in: Flipboard is buying Zite from CNN, which acquired the service three years ago for around $20 million. As part of the deal, it will integrate CNN content on to Flipboard, covering over 300 feeds.

Terms of the deal were not disclosed on the call but CNN is reporting its value “as high as” $60 million*.

The move is a sign of ongoing consolidation in the space and comes in the wake of Facebook launching a Flipboard competitor called Paper. It’s also a signal of how CNN has fallen into the same trap as other, older media companies of being unable to develop new media services effectively.

Flipboard will gradually shut Zite down. About 15-20 people from Zite in San Francisco will be joining Flipboard’s offices in Palo Alto.

But Zite founder Mark Johnson will not be joining.

“Flipboard has proven to be one of the biggest drivers of traffic so syndicating our content into Flipboard will see us creating custom magazines for our shows and talent,” CNN’s head of digital KC Estenson said today.

The partnership with CNN will involve all the verticals the news organization currently offers, including breaking news, tech news, international, and more. CNN will introduce several custom magazines, including those from Fareed Zakaria, Jake Tapper and John King. These will begin to roll out today.

Flipboard is also inking a new premium advertising partnership, “the kind of advertising you see in print magazines,” Estenson said. CNN and Flipboard will be jointly selling ads for the CNN content. “We’ve been developing a healthy relationship.”

CNN, which now has 80 million monthly uniques, says it’s not worried about cannabilizing its audience or losing traffic through the Flipboard deal. The company was already pushing its feed to its Zite product, after all, it just never scaled to the size that Flipboard did. (The companies declined to detail the size of the Zite user base at the time of the acquisition, saying only that it was “smaller than Flipboard by a decent number.”)

FlipboardWebMagazines

The news comes at a time when Flipboard has been ramping up its effort with publishing partners and advertisers. Last month, the company scored a high-profile deal with Condé Nast’s Vogue, for example. Flipboard already offers other Condé Nast titles, too, including Bon Appétit, Details, Glamour, Golf Digest, Vanity Fair and W. And it partners with a number of other publishers, like The New York Times, The Telegraph, Forbes, Esquire, Fast Company, Oprah, and Lonely Planet.

Last September, the company confirmed another $50 million raise at an $800 million valuation, led by Suhail Rizvi, with Goldman Sachs and other existing investors like Insight Venture Partners, Index Ventures and Kleiner Perkins also participating.

Flipboard has been working to add new users to its platform as well, and now has over 100 million users, up from the 85 million last fall.

Flipboard has also made efforts to turn its digital magazine into something that more closely resembles its offline counterpart. With an update in January, for example, it began to add more structure to its magazine so that it was laid out in a way that would still encourage serendipitous discovery of new content, but also in a way that would allow consumers to more easily find the parts of their personalized magazine they would want to read. The change could also be helpful in attracting more brand advertisers to its platform, where they would be willing to pay higher rates to reach readers.

*Update: There’s been some talk of CNN misreporting the size of the sale. Yes, its own product’s sale. It may not be $60 million, after all, so we’ve updated the post to reflect this. Both companies declined to offer details as to the deal terms, but Flipboard did say it wasn’t sure how CNN came up with the $60 million figure cited its original report.

Update to the update: Bloomberg has a source saying that the deal actually involved CNN taking a small equity stake in Flipboard and that “No cash was exchanged in the deal.” (It does also describe Mike McCue a co-founder and CEO of Zite, so you may want to take this with a grain of salt.)

More to come, stay tuned.