Can Eric Hippeau Turn HuffPo Into Big Business?

New CEO Has a $25 Million Investment to Shape Site's Future

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NEW YORK (AdAge.com) -- For many people in media, The Huffington Post is a special kind of obnoxious.

Eric Hippeau
Eric Hippeau Credit: Softbank Capital
Newsrooms from The New York Times to Advertising Age just absorbed across-the-board pay cuts, but Huffington Post just gave everybody raises. Newsstands haven't replicated the Nov. 5 run on election-result papers, but HuffPo traffic has already surpassed its election-season highs. Reporters elsewhere wonder how long they'll get paid to break news, but as long as they do HuffPo will aggregate it without paying them a dime. While some publishers count free interns as a lucky break, Huffpo ran a charity auction for one of its intern slots. At one point a bidder was offering $13,500.

HuffPo has to eventually be a business, at least, like everybody else. And its recent injection of $25 million in venture capital means it also has to become a much, much larger operation than it is now.

Unfortunately for antagonists, the new CEO it installed last week -- Eric Hippeau, the former Ziff Davis CEO turned private equity investor -- seems well-suited to help make that happen.

Not a rainmaker, per se
Mr. Hippeau wasn't tapped to make it rain, particularly. But he'll amplify the voice of outside investors, because he is one; he's special partner at Softbank Capital, which paid into both earlier rounds of funding.

That means he'll have better position than his predecessor in any disagreements with the co-founders, Arianna Huffington and former AOL Time Warner executive Kenneth Lerer. Mr. Hippeau has been on the board since 2006, but the CEO post will let him shape events more directly.

The site's already turned a profit in certain months, and some more mature areas will be expected to profit before planned expansions, such as sections for New York, technology, sports and books. Its big pool of available cash, though, demands a lot more to follow.

"That $25 million is both a benefit and a concern," said one observer. It puts HuffPo on the hook, for one thing, to build a much larger business than they're running right now because Oak Tree Capital, which ponied up the cash for an undisclosed stake, will eventually want its money and then some, just like the other, smaller investors of the first two rounds. When it's time to sell some or all of the company, or go public, the whole shebang had better fetch some $250 million or $300 million.

Mr. Hippeau has been a venture-capital, private-equity guy for a while now, but he earned that job through his stewardship of Ziff Davis, said Jim Spanfeller, CEO of Forbes.com and another Ziff Davis vet. "He's a very, very smart guy," Mr. Spanfeller said. "He's not your buddy-buddy guy, or at least he wasn't. He was a very no-nonsense, direct leader. You knew where you stood."

Another media executive described him as "a visionary, a take-the-bull-by-the-horns guy," while ousted CEO Betsy Morgan was by comparison a "very adept consensus builder, marshaller of general thought."

Surprised by the move
Claude Sheer, who used to report to Mr. Hippeau at Ziff Davis and, like his old boss, later got into venture capital, was surprised he took the job after such a successful career in investing. But he describes him as curious and says his financial acumen is coupled with an ability to see a bigger picture.

"Eric is about as fluent in spreadsheets as you can get," Mr. Sheer said. "But I would also say that he is very conceptual and is able to craft a vision and get people around him."

So where does Huffington Post itself stand, according to the new CEO? "Profitability is a timing issue," Mr. Hippeau said after his appointment last week. "If you're growing your business and you have the capital to invest, your business is not going to be profitable, because you're investing."

As Huffington Post expands, look for new agita over the way it draws traffic by repackaging other outlets' content. But Ms. Huffington isn't bothered. "People who issue these criticisms are missing the point about the linked economy," she said. "Those who want to put walled gardens behind their content are really basically trying to kind of re-create a world that's no longer with us and cannot be resurrected."

HuffPo at a Glance, 2009 Edition

Three rounds of financing: $5 million, $4.5million and, most recently, $25 million

Money spent so far: About $12 million as of February

Ad revenue from January through April: $3.4 million, according to TNS Media Intelligence

Full-time, paid staffers: 61, including 35 in editorial, of whom five are reporters

Visitors: 5.3 million uniques in May, up 106% from May 2008 and up 5% from its election-season peak in October, according to ComScore

Five year-plan: None, according to Arianna Huffington. "In the new-media space you don't work in those increments."

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