Los Angeles startup Flipagram developed a cheap and popular tool to turn photos and videos into slick slideshows of memories. But it struggled to take the app to the next level.
In recent months of trans-Pacific travel, Chief Executive Farhad Mohit laid out the issues to his counterpart at Toutiao, a Chinese online news service likened to BuzzFeed. Yiming Zhang immediately spotted the challenges and opportunities, Mohit said. What took Flipagram testing to understand, Zhang grasped instinctively.
"He's one of these quiet, incredibly thoughtful and young entrepreneurs," Mohit said.
Now, Mohit is counting on Zhang lending the resources needed to keep Flipagram going.
Toutiao acquired Flipagram for an undisclosed amount, the companies announced Wednesday. Flipagram will operate as an independent subsidiary, giving Toutiao a line to people in the U.S. and Flipagram access to recommendation software and other key technologies. Flipagram plans to keep all of its employees.
Integrating an overseas acquisition is no easy task, but Mohit noted that Toutiao has had success with the strategy — albeit with smaller companies — in India and Indonesia.
Founded in 2012, privately held Toutiao is known for aggregating news, viral videos and advertising and using algorithms to show people the stories they presumably would find most interesting. About 175 million people use Toutiao's service each month. Flipagram users produce 10 million videos each month, and many could end up on Toutiao now.
Flipagram wants to use the same customization technology to serve its users videos that captivate them. Mohit thinks that's crucial to Flipagram becoming a major player in social media and advertising. The company discussed developing tools internally, but it would have had a hard time keeping up with Facebook, Google, Apple, Snap and other larger firms. That's why Mohit began talking to potential buyers last year.
Sequoia Capital, an investor in Flipagram and Toutiao, connected the two companies.
"It was a match made in heaven," Mohit said.
Among initial goals is to help Flipagram users get more views on videos that they share publicly. If all goes well with the personalization tools, users who draw big followings could end up receiving a portion of Flipagram's advertising revenue, Mohit speculated.
The road to get there in the next couple of years will mark one of the first big tests in the U.S. of Chinese technological might.
"We think 2017 will be a critical year for the development of short-form video in the U.S. and the globe," Zhang said in a statement. "We are positive on the prospect of user-generated video market and we see the potential of Fliapagram with our recommendation technology."