Every media company should be afraid of Flipboard. The Palo Alto startup epitomizes the best and the worst of the internet. The best is for the user. The worst is for the content providers that feed its stunning expansion without getting a dime in return. According to Kara Swisher ‘s AllThingsD, nine months after launching its first version, Flipboard’s new $50m financing round gives the company a €200m valuation.

Many newspapers or magazines carrying hundreds of journalists can’t get a €200m valuation today. Last year, for the Groupe Le Monde, an investment bank memo set a valuation of approximately $100m (net of its $86m debt at the time, to be precise). That was for a 644 journalists multimedia company – OK, one that had been badly managed for years. Still, Flipboard is a 32-people startup with a single product and no revenue yet.

So, what’s the fuss about?

The answer is a simple one: Flipboard is THE product any big media company or, better, any group of media companies should have invented. It’s an iPad application (soon to be supplemented by an iPhone version), it allows readers to aggregate any sources they want: social medias such as Twitter, Facebook, Flickr or any combination of RSS feeds. No need to remember the feed’s often-complicated URL, Flipboard searches it for you and puts the result in a neat eBook-like layout. A striking example: the Google Reader it connects you to suddenly morphs from its Icelandic look into a cozy and elegant set of pages that you actually flip. Flipboard most visible feature is an interface that transform this:

Into this:

All implemented with near perfection. No flickering, no hiccups when a page resizes or layouts adjust.

For the reader, Flipboard provides the ultimate comfort: no ads. For that matter, Flipboard follows Instapaper’s or Readability’s lead in providing a great reading experience by simply removing ads. Here is the example of Business Insider’s always-good Chart of the Day page:

The original (note the terrible ads — Henry, c’mon, do something…):

And the striped-down Flipboard version:

…it even comes with its own ad-free browser:

This points to Flipboard’s double jeopardy.

For one, since its launch, Flipboard addicted its readers used to an ad-free experience. For a company with no revenue, this might not be sustainable. Inevitably, ads will come, and they will weaken Flipboard’s proposition.  Unless the company comes up with a different kind of advertising. Remember, Flipboard relies on multiple, simultaneous log-on. To use it efficiently, you give the app access to your Facebook’s, Twitter’s, Google’s, Flickr’s accounts. A data miner’s gold mine.

Most of Flipboard’s $50m new funding is likely be used for devising ways to exploit the trove of data it gathers page flip after page flip. Today, ugly banners (and their pathetic derivatives) plague websites and inexorably sink into ever-diminishing value and click-rates. A Flipboard ad system could provide targeted ads, based on feeds selection and on statistical analysis of reading behavior. For example, based on my propensity to read about photography and design (in addition to my obvious media and tech habit), I wouldn’t mind getting occasional, relevant, well-designed ads. I will be more likely to click on those – just as I open almost every mail Amazon sends me: their high relevance results from my years of purchase history and hundreds of page views. I would actually prefer this super-targeted proposition to getting an ad for a fart machine when I happen to browse the Huffington Post from a French IP address.

As you read this, you might think Google is in a strong position to develop its own Flipboard. Last week, TechCrunch reported that most of the Flipboard new money might in fact be used to counter a likely Google attack. Possible. Except for a few things:
a) Google never displayed ability nor appetite for great graphic designs; its services will remain stuck forever in its current arctic look and feel;
b) inserting ads in a delicate Flipboard-like interface will require more fine tuning than what the powerful by-the-bulk Google system currently provides: two weeks ago, I spotted ads for skin-disease ointment  “contextualized” in a couple of Fukushima stories…
c) Flipboard’s attention to execution is way more Apple-like than Google-like (see the Google Docs UI, definitely “owned” by engineers).

Which brings us to Flipboard’s biggest challenge: copyright. At the D: Dive into Mobile conference, Flipboard CEO’s Mike McCue said the following to Venture Beat’s reporter Owen Thomas:

“We want to build a business with publishers, not on the backs of publishers”.

Sorry, this is exactly what Flipboard is doing – even if there is reason to believe McCue is sincere. There is a big difference, though, between the Huffington Post and Flipboard. The former cynically reprocesses stories into self-sustaining news capsules driving millions of page views (see previous Monday Note Aggregators: the good ones vs. the looters). The latter merely provides a clever tool that aggregates and organizes content that you and I already read elsewhere. It that respect, Mike McCue’s invention is also different from Zite, another smart visual aggregator, whose practices triggered a flurry of Cease and Desist letters (story in AllThingsD) for savagely highjacking RSS feeds and stripping off the ads of many media organizations.

No media outlet should be allowed to complain about Flipboard. First, there is a now well-established pattern in the increasing fight between old-fashioned publishers and “inexperienced” Silicon Valley’s entrepreneurs. The latter always invent things that the former should have been first to come up with. And, adding insult to injury, the Valley’s money machine is better at quickly allocating the cash required to fuel a promising idea’s mutation into a fast-growing business. Flipboard is the perfect example. Secondly, by making available RSS feeds in a such profuse way, publishers knowingly contribute to Flipboard’s popularity (see previous Monday Note RSS Lenin’s Rope).

For a large media company (or consortium), inventing their own Flipboard would have yielded full control of the business model: smart advertising and/or a paid-for Premium Flipboard offering high-quality streams of articles (otherwise accessible behind a paywall) and curated third party content. As a reader, I would love to have the best of blogs selected by my favorites writers and columnists.

Is it too late? Well, it’s going to be difficult to top Flipboard excellent execution – and investment. But it would also be interesting to take Mike McCue at his word. If, as he says, he is really willing to work with publishers, then they should meet. Sooner rather than later.