Zite to be acquired by CNN for $20-$25M?

The content aggregator has had legal troubles, but it may be facing a bright new future

Zite may have hit the big iMag jackpot as rumors circulate about a possible acquisition by CNN, according to TechVibes.  Word on the street is that the media giant may be willing to shell out as much as $25 million for the content aggregator.

Zite isn’t giving up any details.  “We’re flattered to be part of such an interesting rumor, but we don’t comment on speculation,” said CEO Mark Johnson in a statement.

Ironically, CNN’s parent company, Time Warner, was one of several major media companies that banded together to write a cease-and-desist letter to Zite for its use of their content a few months ago.  The problem—which more than one online and mobile content aggregator has run into—was that Zite was reformatting news articles to knock out annoying ads, which earned the wrath of companies like the Washington Post, AP, Gannett, The McClatchy Company, and more.

So the team of righteous media corporations united to take down the presumptuous content startup…with a cease-and-desist letter.

“We were surprised we got a cease and desist, since all it would’ve taken was a one-line email,” Johnson told me back in May.

Pulse, a fellow aggregator, ran into a similar legal snafu with the New York Times back in June 2010, when the Times sent a written notice to Apple stating that the Pulse app violated their rights. At one point the app was removed entirely from the App Store, but today it’s up and running and lets users see only a snippet of each article before redirecting them to the publisher’s website. Which is exactly what Zite wasn’t doing—and what consequently landed them in hot water.

But now, with its legal woes in the past, Zite is back on track with a faster reading mode and a button on Web mode that takes you to reading mode.  It aims to be more than just a content aggregator; Zite wants to be a personalized mobile magazine, with articles drawn from the Web based on readers’ specific interests.