In the biggest media acquisition in years, AOL is buying The Huffington Post for a reported $315 million. Under the terms of the deal, liberal pundit and Huffington Post co-founder Arianna Huffington will be in charge of AOL's editorial content—a vast portfolio of blogs including Engadget, Moviefone, TechCrunch, Daily Finance, Politics Daily and many more. Combined, AOL and The Huffington Post generate 117 million unique monthly users in the US. The acquisition fits squarely within AOL CEO Tim Armstrong's goal to be the go-to source for free, online content. But will the combination of AOL's apolitical, cheaply-produced journalism and Huffington's webby, liberal instincts create synergy?
Last night, Armstrong was bursting with optimism. “I think this is going to be a situation where 1 plus 1 equals 11.” But, inevitably, the high-profile purchase has called attention to AOL's last mega partnership, its notorious merger with Time Warner, one of the worst corporate marriages in history. AOL's former CEO Steve Case punctuated that observation with a foreboding tweet:
AOL to Buy Huffington Post; Tim Armstrong says "1 + 1 will equal 11" (NYTimes) http://nyti.ms/g3QFHN Really? That wasn't my experience.
Is this the beginning of a fraught relationship? Predictions are mixed.
- This Is a Great Partnership, writes Ben Parr at Mashable: "While AOL has made plenty of stupid moves (merging with Time Warner and acquiring Bebo for $850 million top the list), acquiring Huffington Post for $315 million isn’t one of them. The Huffington Post is a growing entity with huge influence and reach, and combined with the AOL homepage, it will only become larger... With Arianna Huffington running the show, AOL will gain the content focus and media legitimacy it desperately needs to restart growth and become relevant again."
- I Disagree, writes Shira Ovide at The Wall Street Journal. Ovide says the acquisition is basically a "mea culpa" that Armstrong's "content-first strategy" failed.
The solution is to buy HuffPo and essentially turn over its own content strategy to HuffPo and its founder, Arianna Huffington, who will be assigned to integrate the combined companies’ news and information websites, Huffington Post and AOL content websites. Get it? Huffington Post is taking over AOL.Huffington Post’s revenue is tiny, and profits even more tiny. HuffPo is expected to generate just over $50 million of sales this year. That means AOL’s purchase price is about 6.3 times HuffPo’s projected revenue for 2011. Not cheap. HuffPo has said it’s profitable, even though the company continues to plow money into expanding its ambitions... Just for a sense of scale about that $50 million. Newspaper company A.H. Belo -– owner of just four major daily papers — generated $119 million of revenue just in the third quarter of 2010.
- It's a Good Deal: Huffington Has the Magic Formula for Success, writes Paul Carr at TechCrunch, an AOL property: "Arianna Huffington’s genius is to churn out enough SEO crap to bring in the traffic and then to use the resulting advertising revenue – and her personal influence – to employ top class reporters and commentators to drag the quality average back up. And somehow it works. In the past six months journostars like Howard Fineman, Timothy L. O’Brien and Peter Goodman have all been added to the HuffPo’s swelling masthead, and rather than watering down the site’s political voice, it has stayed true to its core beliefs."
- AOL Still Doesn't Have an Editorial Focus, writes Jemima Kiss at The Guardian: "Buying big names isn't enough without an idea of what that means, and what you stand for. Maybe the kudos of AOL rubbed off somewhere along that transatlantic undersea cable, but it is a name synonymous with ill-judged, overpaid and desperate acquisitions that turn out to be the kiss of death for the victim. I know we've moved on from the vampiric demise of Bebo, but the skeleton of that Time-Warner deal is still rattling in the closet."
- It Will Be Great for Advertisers, writes Mitch Joel at Twist Image: "As it acquires more and more properties across all of the technological platforms, AOL makes itself very attractive to these advertisers by helping them to become more findable (and shareable) in every nook and cranny of the consumer's appetite for content."
- This Strategy Will Not Work, writes Om Malik at Gigaom:
AOL and others... have not yet come to terms with the futility of chasing page views. Despite what you might read in the newspapers and blogs, AOL is still in A-O-Hell. In the most recent quarter, the company saw its advertising revenues go down 29 percent, at a time when online advertising grew about 14 percent. According to eMarketer, its share of total online display advertising was down to 5.3 percent in 2010 from 6.8 percent in 2009. Display advertising tanked during the last three months of 2010 – ironic since holiday season is viewed as one where brand advertisers open their checkbooks. I wonder if adding more page views from HuffPo is only going to exacerbate these problems in the coming quarters.
- It's a Smart Move: She'll Bring Focus to AOL, writes Felix Salmon at Reuters: "AOL gets something it desperately needs: a voice and a clear editorial vision. It’s smart, and bold, to put Arianna in charge of all AOL’s editorial content, since she is one of the precious few people who has managed to create a mass-market general-interest online publication which isn’t bland and which has an instantly identifiable personality. That’s a rare skill and one which AOL desperately needs to apply to its broad yet inchoate suite of websites."
- Everything Depends on Execution, writes Henry Blodget at Business Insider: "Now AOL has a major general news brand (Huffpo) and lots of smaller focused brands (Engadget, TechCrunch, Patch, etc). How will it integrate them? How will it staff them? How will it budget for them? How will it SELL them to advertisers? These are key questions that will matter to the folks who have to actually work for AOL and keep making great content going forward. They will be VERY easy to screw up."
This article is from the archive of our partner The Wire.