The initiative, known as Project Reader, is said to be a multi-year effort from the team responsible for Facebook's news feed. The source isn't certain whether Paper will be a standalone mobile app or "a Web experience suited to mobile devices."
Facebook's reader (assuming it launches) will enter a crowded news reader landscape in which Flipboard (raised funding last year at a reported $800M valuation) is the top dog. Google has an offering in this space (Currents), as does LinkedIn (Pulse).
As highlighted by recent acquisitions and product changes, Facebook is intent on developing into a hub its users rely on for discovering and sharing important news. But getting them to do so through the standard news feed require changing ingrained behavior patterns; no such requirement exists for a separate reader app.
Separately, Facebook has formed a partnership with Russian search giant Yandex (YNDX) to include its publicly-shared data withing Yandex's search results. The deal, similar to one Facebook has with Bing, is part of an effort to gain ground against Vkontakte (VK for short), which dominates the Russian social networking scene.