Startup Watch

News App Pulse Bets Big on Sponsored Content and Bite-Size Content Subscriptions

Brings in More Than $300,000 a Month Off Inbound Interest

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They both are news-reading apps, they both claim 20 million users, and they're both less than three years old. But that 's about where the similarities between the businesses of Pulse and Flipboard end.

While Flipboard has gotten a good deal of attention for pushing flashy, magazine-style ads as a major revenue source, Pulse has recently bet exclusively on sponsored content as its sole advertising source, bringing in more than $300,000 a month strictly off inbound interest, according to co-founder Akshay Kothari.

"It's tempting to just put a banner ad at the end of each story," Mr. Kothari said. "We'd be profitable and making real money."

But Pulse execs believe that would be short-term thinking, in large part because they believe traditional ads are challenged on the small screens of smartphones.

"The canvas is getting smaller, and brands are at their best when they are unshackled and can focus on being powerful storytellers," Dmitry Shevelenko, Pulse's head of monetization products, wrote in an email. "Skyscrapers, takeovers and other bombardment tactics popularized on the desktop web are largely irrelevant on intimate devices."

Instead, like a bunch of young tech platforms that distribute content, Pulse is betting on a type of , yes, native advertising that blends in with the rest of the user experience.

Pulse aggregates headlines from media companies such as ESPN, Slate and the Associated Press into a mobile-optimized, image-driven grid, organized by topic or publisher. Publishers offer Pulse readers full articles or snippets plus a link to the full article. Publishers who partner with Pulse get increased distribution for their content and a cut on ad revenue if a sponsored post runs within their content feed or if they bring the advertiser to Pulse.

While Pulse started out as a paid mobile app, it has since shifted to one supported by both advertising and in-app subscriptions. The product also has a web presence at

Advertisers have so far included T. Rowe Price and Qualcomm, who pay on a cost-per-read basis. The sponsored-content posts they run on Pulse include editorial elements such as text, images and videos just like publisher content. A recent sponsored post from T. Rowe Price was titled "The Next Big Thing in China: Coffee" and ran in the business vertical.

Pulse doesn't think users want 'bombardment' tactics in ads.
Pulse doesn't think users want 'bombardment' tactics in ads.

In the coming months, Pulse plans to start letting advertisers include tools within their sponsored posts that would let readers do things like schedule a test drive or purchase movie tickets.

While sponsored content has brought in a modest $300,000 a month over the last few months, Mr. Kothari expects that number to grow significantly now that Pulse has hired Jordan English from Outbrain as its first ad exec.

Pulse is also trying to differentiate by attempting to prove the difficult business case that people will pay for inexpensive access to specific types of news from their favorite publishers without having to buy a full subscription. The thinking, according to Mr. Kothari, is that the jump from free to full subscription prices is too drastic for a large chunk of readers not used to paying for online content.

In July, Pulse began offering three different subscriptions to Wall Street Journal's politics, technology and editor's picks content, priced from $0.99 to $3.99 a month. The subscription revenue is split between the platform provider, Pulse and the publisher. (Around the same time, Flipboard struck a deal with The New York Times to let its current subscribers access Times content on Flipboard, but not to sell new kinds of subscriptions to The Times.)

Mr. Kothari called early subscription sales "decent," but said it will take time to change consumer behavior.

"A year from today, where we could be instead of seeing free content and [just] one content feed being paid, is Pulse having a paid category with a bunch of things to choose from," he said.

He then hinted that The New York Times and Financial Times might be on deck. "There are three big publishers who have decent paywalls and we're hoping to extend that with them," he said, citing a hypothetical example of a Pulse subscription to the travel section of the New York Times and another that would give Pulse readers access to U.S. economy news from the Financial Times.

Pulse has raised about $10 million in venture capital.

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