The Huffington Post is privately owned by editor-in-chief Arianna
Huffington and chairman Ken Lerer, who founded the site in 2005
with $2 million in seed capital and subsequently raised $35 million
in venture funding from Greycroft Partners, Softbank Capital and
Oak Investment, as well as from former AOL chief operating officer
Bob Pittman. AOL will pay for $300 million of the purchase price in
cash.
Last year the Huffington Post, which draws 24 million readers
and generates around 500 million page views every month, according
to ComScore, brought in $31 million in ad revenue, or a little more
than $1 per user per year. The addition of Huffington Post will
increase AOL's audience 22%, according to Mr. Armstrong, but more
importantly infuse the company with the Huffington Post's
expertise: aggregating and creating low-cost news and information
for mass audiences.
Focus on local
AOL's Patch unit, a series of hyper-local news sites, will be
folded into Huffington Post, which has long sought to expand its
local-content strategy. Local advertising has become a closely
watched sector given the growth of locally focused startups such as
Foursquare and Groupon. AOL made new investments in Patch this past
year, expanding into 775 towns across the U.S. Each town has its
own website with typically one editor and a handful of freelancers,
a content-production model similar to the Huffington Post, which
runs on an army of more than 6,000 unpaid bloggers and a paid staff
of 88 editors and writers, all posing more than 600 articles a
day.
Ms. Huffington, 60, will relocate to New York as part of her new
role, though she said she will still maintain her home in Los
Angeles and will go back and forth. "We're going to start a napping
room in New York office so we can take naps in between working hard
bringing the two great teams together," she quipped.
The Huffington Post has grown at a phenomenal clip, going from
4.5 million monthly readers in 2008 to around 24 million every
month this past year, coming close to The New York Times' monthly
online audience of 30 million, but the Times' numbers may drop once
it institutes its paywall later this month. The two websites are
often compared against each other to underscore the wildly
divergent news-gathering ethos between the two with the presumption
that the lower-cost, mass-generated model may eventually triumph
over the more-established one.
Recent courtship
Mr. Armstrong had eyed the Huffington Post as a possible
acquisition since coming to AOL in 2009, but according to both he
and Ms. Huffington, they hadn't significantly met until very
recently. "I've been a substantial long-time fan," Mr. Armstrong
said. "But I was only a first-time caller a few months ago."
"Honestly, we weren't necessarily looking to do anything," Ms.
Huffington said about the acquisition, though she did admit that a
number of other companies had been interested in possibly
purchasing the Huffington Post over the past year. But when she and
Mr. Armstrong met at the Quadrangle conference in November, Ms.
Huffington recalled that she was very impressed with what he said.
"We met the next day, and it was just an amazing meeting of
visions," she said. "I explained all that I wanted to happen, and
he talked about where he wanted to go."
"Arianna is the best content-DJ on the web," Mr. Armstrong said,
prompting Ms. Huffington to crack he had beaten her with the better
teaser quote. "I'll have to come up with something now," she
said.
In many respects, the acquisition appears to work in the favor
of both companies, as Ms. Huffington said she was "looking to
double-down in growth" this year. And for AOL, the Huffington Post
represents a successful low-cost content model that can still bring
in a significant audience, an enticing prospect for Mr. Armstrong
who sees original content as essential to the company's long-term
success.
Bid for ad revenue
The New York-based portal has languished in the past year, pulling
in $2.41 billion in revenue for 2010, a 25% drop from the previous
year. But Mr. Armstrong has purposefully pruned the often cluttered
advertising from AOL's wide-ranging properties, as well as slowly
shed its legacy internet access business, which still accounts for
39% of the company's revenue. The CEO is banking on fewer but
bigger ads that will have more appeal to people online.
Underscoring that strategy, AOL recently released a new
large-size advertising unit called Project Devil that was deployed
at the end of last year. The company has also submitted the unit to
the Interactive Advertising Bureau as a possible new standard
within the display-advertising industry.
But AOL still has its work cut out for it. The company's share
of total online display advertising fell to 5.3% in 2010 from 6.8%
in 2009, according to eMarketer, and its display- and
search-advertising revenue declined in the most recent quarter. AOL
took in $151.1 million from display advertising during the last
three months of 2010, a 14.3% drop from the same period in 2009.
Search revenue, meanwhile, fell 33.7% to $96.4 million, but that is
partly a function of its shedding its legacy dial-up or internet
access business, which still drives a lot of its search-advertising
revenue, as users who access the internet via AOL tend to use its
search feature. The company has a revenue-sharing agreement with
Google, which powers the underlying search engine.
While AOL's ad revenue has declined, Google's and Facebook's have grown, signifying the changing nature of
user's online habits.
Turnaround in 2011
Mr. Armstrong said the company should see a turnaround by the
second half of this year. Folding in the Huffington Post will
clearly boost AOL's bottom line, but he sees the acquisition as
having more than just an additive effect: AOL can now tap into its
expertise in driving social traffic, as well as its plays into
cause marketing, which Mr. Armstrong thinks will appeal to big
brand marketers.
"We're going to have the largest company focused on helping
brands online," he said, "and Arianna's group is great at growing
content through the community, through cause marketing and with
local content." Ms. Huffington added that adding women's lifestyle
categories to Huffington Post has become a successful part of its
growth strategy, an area that Mr. Armstrong had also been looking
to grow.
"We're building the new American media company," Mr. Armstrong
said.
But the more immediately pressing concern for him and Ms.
Huffington was the Super Bowl, which was about to begin in a few
hours. When asked who they were rooting for, Mr. Armstrong said the
Patriots, "but they're out, so the next closest would be Green Bay,
because my wife went to the University of Wisconsin."
And Ms. Huffington?
"I've been told by Howard Fineman," -- the journalist who
recently jumped from the ailing Newsweek to Huffington Post --
"that I need to root for the Steelers," she said. "So I guess we're
already in disagreements," she said mockingly. "It's going to be so
very fun."
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