Flipboard rides the tablet wave

PALO ALTO, Calif. -- Flipboard, which makes an app that turns Web pages into an online magazine, gambled its entire app business on the Apple iPad becoming a splash.

Apple had just announced the coming tablet computer, whose success was far from certain in 2010. That's when Flipboard approached venture-capital firm Kleiner Perkins Caufield and Byers.

"There were definitely people in the room who were, like, 'Guys, this iPad thing isn't going to go anywhere. What about the Web?' " says Flipboard CEO Mike McCue, 45, a serial entrepreneur who co-founded the company with Evan Doll, 30, head of iOS engineering at the upstart.

Kleiner Perkins, Index Ventures, Insight Venture Partners, Twitter co-founder Jack Dorsey, Facebook co-founder Dustin Moskovitz and a Who's Who of other technology investors have since pumped $60 million into Flipboard. The news aggregation category has become a crowded space. Competitors, including Pulse, Zite and Google Currents, are all vying for the same advertising dollars.

Flipboard's small downtown Palo Alto digs buzz with activity. The start-up has grown to 56 employees from 32 a year ago. Workers share desks, and there are no cubicle walls in the space that resembles a converted garage.

Employees serve up media redesigned for the mobile masses to consume on devices. Content from publishers, including USA TODAY, is presented in a magazinelike format for the iPad, iPhone and iPod Touch as well as on devices using Google's Android. Consumers can select from categories such as news, tech and business, as well as add Facebook and Twitter accounts.

That's been a hit so far. The app company has garnered more than 8 million users since it launched on the iPad in July 2010.

Success came quickly. Apple crowned Flipboard "iPad App of the Year" for 2010.

"They certainly have become the media darling," says Morningstar analyst Rick Summer.

Flipboard is attempting to revolutionize digital advertising. Like a magazine, it allows people to flip between pages and land on full-page ads.

"We replaced the (old-style online) ads with much more beautiful ads," says McCue. "We took out those banner ads, which don't do a good job of monetizing the content. We get rid of those tiny ads and allow the publisher to sell full-size print-style ads."

People on Flipboard can scroll through items from Facebook, Twitter, Instagram, Google+, YouTube, RSS feeds, The New York Times, USA TODAY and numerous other publications — all as if it were one customized magazine. "It's like you're the editor of a magazine," says Doll.

Flipboard solves a problem faced by app users: Toggling between apps can be cumbersome.

"They're trying to be your own custom, private magazine rack," says Michael Spector, CEO of Vista Wealth. "They're trying to convert print media to digital."

But keeping pace with its competitors is no small feat. Alphonso Labs, creator of Pulse, has seen more than 15 million downloads. The company is offering monthly subscriptions to The Wall Street Journal and plans to expand to other newspapers. "The idea is to expand their user base and to convince readers to get the full subscription," says Pulse CEO Akshay Kothari. Pulse is also a partner with USA TODAY.

Flipboard makes fast innovation a priority. Among the techniques the company is employing: