Flipboard’s Mike McCue on the last startup he’ll ever do

Inside a renovated building in Palo Alto, Calif. is a wall adorned with photographs from some of the major figures and breakthroughs of history. From David Bowie to the death-defying leap by Felix Baumgartner to the Supreme Court ruling on marriage equality, this installation is designed to highlight positive moments that have transpired through an exchange of knowledge and ideas.

For media publishing platform Flipboard, the occupant of this office space, spreading ideas and stories is part of the company mission. After more than five years, Flipboard believes it has found its stride. In fact, cofounder and CEO Mike McCue believes it will be the last startup he’ll ever do, something he’s said about Flipboard before. This time around, the 49-year-old entrepreneur wants to continue to execute his vision and keep Flipboard going for many years to come.

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Standing tall and building toward profitability

At first glance, the company might not seem like anything spectacular, particularly in a fluctuating marketplace. But as publishers and news outlets pontificate about the future of media, Flipboard appears to have settled on a path to democratize media and re-engineer how people get their news. It has remained steadfast in its approach, even with the arrival (and departure) of other companies, including Facebook, with its Paper app, Circa, Apple News, Inside, AOL’s Editions app, Yahoo News Digest, and Zite, which Flipboard ultimately acquired and shut down.

Flipboard aspires to be the new magazine rack to replace the one we’d come across while navigating our way down the street or in a busy airport terminal. It now counts more than 90 million monthly active users and is “significantly” growing. But it has faced criticism from those who claim that the company is “doomed” and even predictions that it will likely sell soon due to its fading fanfare. This year, there had been speculation that a number of companies were looking to acquire Flipboard, such as Twitter, which was reported to be making a $1 billion bid, or interest from Google and Yahoo. McCue shrugged the rumors off, saying that it’s “all in the same vein as the dead unicorn meme.”

“Part of the thing is that if you read into [the Bloomberg article], if you take the headline away, [Flipboard] sounds like a pretty damn good company,” he told VentureBeat in an interview.

He admits that he’s lost some top lieutenants recently, including McCue’s cofounder Evan Doll, chief technology officer Eric Feng, head of product Eugene Wei, chief financial officer Jeff McCombs, and, most recently, the head of advertising and monetization product Dave Huynh. But he says that kind of turnover is normal for a company like Flipboard after five years. “You have to change,” McCue explained.

As for a lack of fanfare, he pointed out that Flipboard doubled its monthly users from 40 million to 80 million in less than a year. Now that it has the user numbers, McCue is focusing on the next phase of development, which involves making the company profitable so “that it can stand on its two feet.”

And while the number of players in the space appears to be contracting, McCue has a plan to avoid the fate of formal rivals, like Circa. He describes the problem there as two-fold: “There was no scale of users and they weren’t able to have enough runway to get the scale to happen. [Circa] didn’t have a business model that could sustain them.” He did praise the news app maker, saying it was “well innovated by really good people and captured some trends that will be important and live on.”

McCue isn’t new to the startup space. Prior to Flipboard, he cofounded Tellme Networks, which was acquired by Microsoft in 2007, and before that, he started pen computing company Paper Software.

“One of the things I’ve learned is that you have to build a real business,” he said. “I started a company with not only a good vision for a product, but an ecosystem that encompassed a business fueled by the product. When you invest in the user experience of the product, you make the business model better, as opposed to worse.”

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It’s about creating that “aha!” moment

At VentureBeat’s MobileBeat conference last year, McCue shared that Flipboard is about creating “aha!” moments within its apps. It’s this thinking that has pushed the company forward and guided its thinking as it continues to monetize itself. “We’ve always had a clear idea that what we can do is to create an ecosystem for great stories to thrive and support a business model that’s beneficial to authors and Flipboard,” he told us recently.

“We’re trying to give [advertisers] an opportunity to build brands in a social media world. This is an important thing. The problem is that if you build a product that’s inherently direct response, it’s not a good platform for building brands.”

Advertisers have a plethora of opportunities to market their products, including running sponsored tweets on Twitter and buying ads on LinkedIn, Facebook, Instagram, or even on Google. There’s also native advertising through companies like Sharethrough. But those don’t really offer the capabilities necessary to create desire in viewers, the way a full-page ad in a magazine can, and this is something that McCue said Flipboard can offer.

“If you look at the world of advertising in totality, there’s roughly $600 billion in revenue across digital, offline, print, and television globally,” he explained. “70 percent is still offline, meaning we’re in early innings. The market hasn’t shifted the percentage. It’s just the beginning.”

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“What you see are that the vast majority of dollars moved online have been for direct response ads,” McCue continued. “What’s offline is brand advertisements. Any company needs to do two things: build brand awareness and desire, and harvest that desire and turn it into sales. These are two very different kinds of advertising.”

Take Banana Republic as an example: If the clothing retailer wants to market its next line of khakis, it’ll buy placement on a billboard in San Francisco, an ad in Vogue, TV commercials, and more. The goal, as McCue shared, is to be aspirational, emotional, immersive, and tell a story. What Flipboard seeks to offer is the same experience you might get from print advertising but have it hosted on a digital-based publication with advanced targeting by interests.

But rather than have Flipboard be inundated with ads like just any other website filled with information, the company is going to be purposefully picky about what is displayed within its app. McCue is creating a product that supports premium content and advertisements and at this time, only select brands will get to tap into Flipboard’s audience.

“Brands want to go where there’s high-quality content. They don’t want to be next to a diet ad or a picture of you in a bar. When you have a long-tail of advertisers that number in the millions, you can’t create that type of experience,” McCue shared. That’s why his company is focused on the top tier brands instead of making the platform available to everyone.

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“It’s about reaching a person when they’re in an aspirational state,” he remarked. “One of the challenges in products is with mobile, when are people using them? When are they checking out products? Flipboard is diving into your interests and passions. Do you want to be a better parent? Where do you want to travel on summer vacation? People do a deep dive, and they do it when in an aspirational state or personal prime time. They’re thinking about their future, shopping, open to inspiration and ideas.”

So rather than have a product that is similar to others on the market, Flipboard has spent its time and effort looking at ways to not only create a unique experience for users but also to have a way to impact advertisers and show that this isn’t a typical marketing opportunity.

The go-to place for what you’re passionate about

While social products have become places to share knowledge, they have also come under fire because of perceived censorship. Most recently, Facebook was accused of directing human editors to filter out posts from conservative media outlets, thereby offering a biased view to users within its Trending Topics tool. The company denied these claims but made some changes to boost its credibility among its conservative users.

So, as a content curation service, where does Flipboard stand on this issue? “We want it to be the go-to place for what you’re passionate about and show multiple perspectives from people that are just as passionate, if not more,” McCue remarked. “We want people to get a full roundup of perspectives and then, if they want to see more, click-through. We want advertisers to map to the interest of the user’s choice.”

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“There is no algorithm for ‘insightful’ or ‘relevant’, no algorithm to duplicate what the front page editor of the New York Times does every morning,” he continued. “You do need people. You have to treat that as a solemn responsibility, just like publishers have done for decades. How you think about algorithms and popularity and weigh that on importance and insight is a challenging problem space.”

McCue said Flipboard is a company that mixes algorithms with human editors and the community in order to show users articles and content at the right time without serving up link bait or any extreme views. “The problem that the web has had is that it has simultaneously devalued advertising and made it harder for journalists to have their work subsidized,” he said. “Everything is trending to the law of numbers model. The stuff that’s the most popular and gets the most numbers is the stuff that oftentimes is not what users are going to read.”

Flipboard believes it’s among the more unique products out on the marketplace, especially with the power of technology integrated from its Zite acquisition. Users can more acutely fine-tune the content they want to see, specifying topics and interests they want to learn more about, muting sources, and more. This also helps advertisers better target their ads as the company has improved its monetization offering with Zite’s interest graph.

The future

Word has it that Flipboard is working on its next major release, though the company is keeping the details under wraps. But if we had to speculate, there might be a push toward more monetization, not only for advertisers but for users, as well as the inclusion of more sources of curation to help tell the whole story about a particular story, topic, or issue.

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While there’s cause for celebration when a company gets more than a billion users, McCue doesn’t subscribe to that kind of thinking, saying that Flipboard is “focused on quality over quantity, class over mass, the world’s high-quality brands versus ‘come one, come all’.” His goal is to have a “solid ecosystem that stands on its own two feet from a cash flow point of view” and one that has a long-term vision to provide an exceptional experience for users and advertisers alike.

McCue stated that although Flipboard raised $50 million in new funding in 2015, efforts are being made to make the company sustainable so it will not need any further outside investment. McCue says that Flipboard’s ads are impactful enough that they sell as a cost per impression (CPM) above traditional mobile rates.

He admits that the company has been thinking about a self-service ad model, but there aren’t any immediate plans to implement it. Among the issues that need to be sorted out are a channel model that allows companies to have an ad, content, or page on Flipboard and provides the right amount of prominence. McCue seeks to emulate how magazines work — after all, it’s a big part of how the product was conceived. However, he wants to avoid random ads being displayed solely through programmatic efforts:

“When you have machines do the bidding, you get Kim Kardashian and diet ads. There’s nothing wrong with that, but that’s not what Flipboard is about. It’s where you come to read about where the future of clean energy is going,” McCue said.

Flipboard has also thought about letting users generate some income off its platform, but any plans are very much in the early stages. In an example McCue shared, if you found an awesome camera lens article that you flipped, and someone purchased it on Amazon, you might receive an affiliate fee. But he explained that right now, a lot of Flipboard’s users who curate content aren’t doing it in the hopes of making money. “They’re using it for fun or passion, or they’re building a following, advancing their business, career, or point of view on something that translates back into doing marketing.”

Additional forms of curation could be a part of Flipboard’s product roadmap. McCue hinted that as the battle over video plays out on Snapchat, Facebook, Twitter, and YouTube, it might make sense for live videos to be integrated into Flipboard. “[Video is] growing in importance and a place for brands to participate,” he opined. “All the work that we’ve been doing to articles applies to videos.”

Flipboard does support videos now, but as more and more people share content around their interests in real-time, being able to bring that into the spotlight could become increasingly important. “We think we can do a better job surfacing and discovering [that content] while also having a more immersive experience,” McCue claimed.

So while naysayers may argue that Flipboard is doomed, the company is continuing to march forward with McCue’s vision, emboldened in its task of creating a long-term product that lets people share what they’re interested in. You could think of it like a topical Digg or a StumpleUpon but with mobile in mind and an aha! moment for both users and advertisers. McCue believes that Flipboard is in a unique position:

“There are very few platforms at scale that provide premium content and advertising experience on mobile. We’ve been laser-focused on the same thing for the last 5.5 years.”