NewsGator, finding success with business customer, raises financing

newsgatorlogo1212.pngRSS services company NewsGator has gained a promising number of business clients even as its consumer-focused feed reader services face increasing competition from Google, Yahoo and others.

RSS, often called Really Simple Syndication, has proven to be a key web standard, and NewsGator is one of the many companies to benefit. RSS is a method of formatting data in a software service, such as the text or photo of a blog post, structured so that the data can be sent to and displayed by other sites.

Hoping to gain more market share both with businesses and consumers, the Denver, Colorado company has closed a $12 million round in a fifth round of financing. It previously raised $17 million.

RSS feeds can be useful for anyone from news junkies to a company’s employees — “feeds” can be aggregated from blogs, wikis and other software, to help people more quickly process large amounts of information.

NewsGator is perhaps best known for the two desktop feed readers it purchased — Windows feed reader, FeedDemon and its Mac feed reader NetNewsWire — along with related services like feed readers for mobile devices. These feed readers display a list of feeds that you choose to subscribe to, a substitute for going to each web site you want to follow each day. Although NewsGator’s feed readers have been available for years, they are facing increased competition from Bloglines and Google Reader.

NewsGator has a quality list of business clients, however. Its “Enterprise Server” lets IT departments install local versions of its software, so employees can get feeds from the web, and integrates this with the other software the employees use. NewsGator says more than a hundred mid to large-sized businesses are using this service to aggregate information from internal blogs and wikis (more here).

usatodaynewsgatorwidget.png The company also has more than 50 media companies using its widget distribution service, including USA Today, Newsweek and the San Jose Mercury News. These widgets are distribution mechanisms for RSS feeds, where another web site can put a widget showing these feeds on their own web pages (see USA Today screenshot).

Social networking developer platforms have also opened up new opportunities for NewsGator RSS feeds and widgets to reach consumers. The company quickly jumped on the Google-led “OpenSocial” set of standards, whereby third parties can build applications that can work on any OpenSocial member network. It created a Flash widget called Didjahear!?, that displays video, photo and text content from the two million RSS feeds that NewsGator collects on the web.

This widget, the company told us last month, gathers data on what content you and your friends click on and share, within social networks that are a part of OpenSocial.

If you use NewGator to create a widget for Myspace featuring your favorite online videos of, say, soccer clips, NewsGator will learn which videos your Myspace friends clicked on, spent the most time watching and forwarded to others.

Mobius Venture Capital, which first invested by itself in 2004 (before Bloglines sold to Ask), is returning, along with Masthead Venture Partners. Vista Ventures is joining this round.