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As competition rises, Instapaper shuns outside dollars

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ReadItLater just raised $2.5 million to bulk up its content shifting operation while online document site Scribd, a start-up with $26 million in funding, just launched a new reading app that has similar features. Meanwhile Apple (s aapl) is preparing to go live with iOS 5 that also allows users to read web content later.

If you’re Marco Arment founder of Instapaper, known for popularizing the time-shifting reading genre that is now suddenly quite popular, what do you do? Nothing, really.

He told me that even with the new competition and funding news by ReadItLater, he feels no more compelled to take on venture capital. We had an interesting talk earlier this year where he laid out his reasoning for building a more traditional business that only spends what it takes in and doesn’t look for outside funding. Arment said he won’t close the door on funding, but it’s not something he wants or needs at this time, even with the added company.

“Instapaper is in the very fortunate position of not needing venture capital to achieve its foreseeable goals, and business is doing better than ever. I’ve always hired help the old-fashioned way — by paying people with part of the money I make — and it’s working great so far. I love keeping the company lean, simple, and efficient. But most competitors, new and old, have chosen to seek funding, either out of necessity or to achieve different goals,” he said.

Arment’s lean philosophy has forced him to narrow his ambitions and focus his attention on developing for iOS. He has released an API that allows other developers to bring the service to additional platforms. But he’s content to stay on iOS, which he says differentiates him from ReadItLater.

He said while ReadItLater does have an iOS app, it has been more focused historically on Firefox and Android (s goog) and now appears to want to conquer all platforms. That, he says, provides an opportunity to specialize on iOS.

But what about Apple, whose Reading List feature in iOS 5 allows people to read stories later? He said he doesn’t have any indication that it will result in any losses to Instapaper’s users. He wrote earlier that his biggest challenge is just educating people about the value of his app, something he thinks Apple will help accelerate.

Arment said the VC pitches still keep coming in at the same pace and he still keeps turning them down. He might change his mind if he undertakes a big expansion that requires new funding. But for now, he’ll leave that to others.

“Profitability with a small company and no outside investment is a great place to be, but not everyone’s businesses can sustain that, and it forces constraints. I can’t, for instance, make great apps for every new platform that comes out, so I’ve chosen to focus on the platforms I care about most. To me, these constraints are a net positive: this is the type of business I want to have.”

We’ll see if Arment’s tune changes over time. But my guess is it won’t, not soon at least. He’s proven an old school business model can work and though it will be more tested now that bigger players, many with VC funding, are expanding on his turf, it doesn’t mean the party’s over. I think by choosing the right platform and then pushing the pace of features and updates in order to create a more premium experience, I think Instapaper can continue to thrive and find room to grow.

We’ll have to see how hard Apple pushes its Reading List feature, which is likely the biggest threat to Instapaper. But if the start-up can survive, it will be a great lesson in how to navigate among competitors and platform holders and still find a way to succeed. And if that doesn’t work, well, the VC dollars are just a phone call away.

3 Responses to “As competition rises, Instapaper shuns outside dollars”

  1. I commend Marco for sticking to his word and growing his business without outside funding. It takes a lot of focus and energy to do what he’s done. Who knows what will happen in his market, but my money and loyalty are with instapaper.

  2. I like Marco and think he is right to avoid taking outside money if at all possible … but … it has lately become obvious that he is losing the user-centric focus that made Instapaper such a great product.

    Before he become quite so well-known, the beauty of Instapaper was that you could tell that every design decision was driven by the question “What would be best for my users?”.

    Now, however, with his new-found celebrity and his new social position among the cream of content producers in our geek niche, his perspective has naturally shifted. The cloud that always hung over Instapaper was the simple, brutal fact that its core function was to strip content away from the content producers’ pages, away from their chosen context and, of course, their adverts – for content producers, Instapaper represented lost revenue, a breaking of an generally understood social contract. Before, Marco could always rationalize away such nagging thoughts because it was clearly in the user’s interests.

    As his fame grew, however, he must have increasingly found himself in social situations or sharing conference panels or even just DM’ing with the very people from whose pockets Instapaper was lifting coin. That must have been embarrassing for him and, slowly, his perspective changed – in a recent episode of his Build & Analyse podcast, he revealed that, out of respect for the content producers, Instapaper does not save multi-page articles as a single page.

    Now, this is something that all the competing apps and even Safari’s Reading List feature do … and they do it because it is clearly in the interests of the user, it is one of the major reasons why you would use such an app. Marco stated, however, that he didn’t feel right about it and referred to the multi-page OS X Lion review by John Siracusa, the host of another show on Dan Benjamin’s 5×5 networks, on which Marco’s Build & Analyze airs.

    Clearly, it would be a tad awkward if Instapaper favored the convenience of its users over the ability of Siracusa to receive the page views his hard work warrants, no doubt it would an impediment to the nascent friendship between the two hosts – in a touching moment, just a month ago, Marco and fellow Internet celeb Merlin Mann bought Siracusa a new toaster oven but even a high-end toaster is nothing next to the money that millions of page views earn.

    I have no objections to Marco’s shifting allegiances, life is change, but, as users, it is important to recognize when our interests no longer align with the person whose software we integrate into our lives – when such a vital feature is omitted out of social nicety, well, we need to take note. Instapaper will continue to earn millions for Marco but it may be time for the more discerning among us to find another reading app, one that champions the user above all else.

  3. I think that is a great strategy. So many companies take on so much thinking of the bright side and not taking into account what happens if things don’t work out as they planned.