The challenge of distributing digital books has already been solved with the Kindle and iBooks. But, reading a book is a different experience than reading a digital newspaper or magazine. Books are read linearly whereas newspapers and periodicals are flipped through. While we might read a magazine article from beginning to end, how we discovered that article could have been through the random process of flipping.
I belong to two large associations which have both tried to distribute their magazines in a digital format. The problem is that both associations have chosen to use solutions like NXTbook or Issuu. Once you get to a page that you want to read you have to click to zoom in because the text is too small to read when viewing the entire page. Actually, each page isn't really text - rather it's a screenshot of the magazine's artwork - so you can't search for text, easily, or copy and paste it. If it's a multicolumn article, you then have to pan back up to the top next column to continue reading. These solutions are basically an online version of microfilm.
There are several other problems with this user experience. First, the magazine rendering is CPU intensive, so it's slow to initialize, turn pages, and it doesn't work well on older computers. Also, since it's just screen shots of the magazine pages, there's no multimedia such as video or audio.
This solution is a clear cut example of a case that violated a key rule in UI/UX: Start with the UX and then work back to the technology.
The Daily and Project provide good user experiences since they're designed specifically for the iPad and they have rich multimedia. However, the content can only be displayed on the iPad. If you send an article from The Daily to someone without an iPad, all that the recipient will see is a humongous screen shot of the entire article as rendered on the iPad.
Flipboard currently provides the best experience that I've seen. I love that I can read a blog, using Flipboard, simply by pointing it at the blog's Twitter stream or Google Reader.
There are two distinct ways in which publication media is distributed and consumed. One way is through batch publication, such as a daily or monthly publication. Both The Daily and Project use this technique. The other way is through continuous updates, i.e. a river of news, such as most blogs, CNN.com, etc.
The problem with batch publishing is that you can't easily go back to a previous issue's article. If you missed it, then you missed it. The nice thing about a river of news is that you can back up in your river to pickup where you left off.
The ideal solution is an open format (such as RSS or ePub) so that the content can be best displayed depending on the medium. Consuming a slightly customized RSS feed via an application similar to Flipboard is how I envision the implementation - let's call it a Digital Publication Feed (DPF).
It would work by pointing a Flipboard-like application at a web site for automatic detection of the DPF (similar to how my web browser automatically finds the RSS feed when visiting cnn.com). The DPF would be an RSS feed standardized for the digital publishing industry with a few special tags, such as <hed>, <dek>, <byline>, <lead>, <text>, <video>, <audio>, plus other metadata to give any third party consuming application the ability to render news articles. There could even be tags for handling comments and ad revenue sharing.
The DPF is a fairly simple concept, but the beauty is that it would work well across different devices and, most importantly, it would be a standard.
While generating ad revenue is vital, it's important that ads don't get out of control. Leading newspapers don't plaster ads on the front page of their printed papers. Yet, if you look at the newspaper industry's attempts to monetize the web you'll find web sites where a single article stretches across multiple pages for the sole purpose of increasing advertising CPM. At least, with an interstitial ads, the reader only needs to click once to get beyond it.
My final pet peeve is with news sites where the actual content of the article is completely below the fold. You can't even begin to scroll down to the actual article until the multiple instances of the Flash players finish loading and begin rendering their flashing ads.
P.S. - I wonder if it's called Flash because so many ads now flash using Flash? (That's a joke.)