CNN and Zite: Buying innovation or killing it?

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By Anderson /  31 Aug 2011 , 19:35

The immediate reaction to CNN’s acquisition of iPad news app Zite was that yet another plucky start-up had been gobbled up by a major company. Most comments from tech entrepreneurs and digital media mavens carried the assumption that big companies are where innovation goes to die.

Digital journalism pioneer Dan Gillmor said on Google+, “Trying to think of a startup that has been worth a damn after a big media company acquired it…”

Before news apps, media companies went through a round of buying news aggregators. MSNBC bought Newsvine in 2007, after Fox bought Newsroo and Cond Nast bought Reddit, both in 2006.

CNN set
Users of the Zite iPad news app are concerned CNN will stifle the start-up

If you’ve never heard of Newsvine, don’t worry, you’re not alone, or Newsroo for that matter. They haven’t set the world on fire since being bought.

The Reddit deal has been far from a corporate match made in heaven. Last year, corporate parent Cond Nast rebuffed the site’s request to sell ads supporting the legalisation of marijuana in California, a favourite topic in the world of Reddit. In response, the site simply ran the ads for free.

In 2007, the New York Times bought Blogrunner to much fanfare. The site is still running, but Blogrunner’s technology has melted into the background of the newspaper’s site, powering a most blogged section on the site.

That’s probably the fate of most tech start-ups bought by media companies, they quietly become a cog in the machine.

Talent as the target

On the plus side for fans of Zite, the company doesn’t seem to have been “acqhired”, bought simply for the talented team with no interest in the product the company has developed.

Tech and mobile giants are notorious for doing this, a move they call talent acquisition. Facebook even has a going price to acqhire good talent. Vaughan Smith, Facebook’s director of corporate development, told the New York Times that good engineers are worth half a million to a million.

Google has frequently followed that same model: A classic in the genre is when they bought a pioneering location-based service called Dodgeball in 2005. If you’ve ever used a service to check-in to a location like Foursquare, then Dodgeball would seem instantly familiar. In a way, it lives on with Google’s Latitude service, but shortly after acquisition users were lamenting how quickly the serviced faded away.

Google finally shuttered Dodgeball in 2009, and its founders promised to clone it as they fired a few shots back the search giant, which they had left in 2007. Clone it they did, launching Foursquare. The new location-based network netted another $50m in funding in June, which values the company at between $600m to $1bn.

For Zite, it will remain a separate company. CNN Digital General Manager KC Estenson said that integrating Zite’s technology into CNN products wasn’t their main priority. The real goal was to help CNN increase “personalised content discovery”.

For news organisations like CNN, the motivation is different in acquisitions is different than for tech giants like Google and Facebook. Few news organisations have much experience or history in technology development. Those large organisations that do develop their own technology often find it difficult to move at the speed of the market. A few strategic acquisitions would seem to make sense.

Of course, they quickly run into the same problem that any deal does. Buying a quick moving start-up doesn’t suddenly change the culture of your organisation. If the corporate culture is slow, cautious and bureaucratic, a couple of plucky entrepreneurs isn’t going to change that.

Has your company been acquired? What were the challenges? Did it work out as you had hoped?


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