Why am I telling you all this? Because next week AOL will issue
its first-quarter earnings report. Bear with me.
First, I'll say that I fully expect the internet giant to issue
positive news of some sort, keeping the ball rolling from the last
quarter, when it reported a 4% increase in revenue to nearly $600
million; Wall Street was definitely happy to see quarterly growth
for the first time in eight years.
Among the predictable bright spots: AOL's Huffington Post, which
will, surely, once again tout its traffic growth. Which, on the
surface of things, would be great, because AOL's February 2011
purchase of The Huffington Post for $315 million -- and acqui-hire
of Arianna Huffington, who became president and editor-in-chief of
the Huffington Post Media Group -- is key to AOL CEO Tim
Armstrong's big content play. Under Arianna's direction, AOL is
supposed to become a state-of-the-art media company, a content
juggernaut designed to give agencies and brands access to not only
passionate, engaged audiences across verticals, but massive scale.
Indeed, as Bloomberg Businessweek's
Edmund Lee noted last month, citing ComScore data, "HuffPo's
monthly unique viewers have soared to 45 million in the past two
years, rising by an average 22% per month in the second half of
2012."
Lee correctly pointed out that HuffPo has gotten a huge boost
from traffic driven to it by the AOL home page. But a largely
(already) forgotten part of the Huffington era at AOL: Arianna's
real-estate grab. She rebranded a bunch of existing AOL editorial
content -- aolnews.com was redirected to huffingtonpost.com, AOL TV
was relabeled HuffPost TV, etc.
Arianna also started aggressively spending AOL cash to acquire
old-school journalistic talent. Tired of being tarred in the press
for her site's shameless borrowing of other news organizations'
journalism -- i.e., HuffPo as the über-aggregator -- Arianna
poached a bunch of editors and reporters from The New York Times,
Wall Street Journal, etc., so HuffPo could do more original
reporting.
She also went on a costly international ego-expansion spree --
launching Le Huffington Post in France, for instance -- which helps
explain why HuffPo, which was briefly profitable as an independent
company, is now bleeding red ink under AOL's ownership.
As Lee reported, AOL's overall unique views have seen
little net growth since the HuffPo purchase. It seems that Arianna,
the Great Borrower, arrived at AOL intent on grabbing resources
from the rest of the company to shore up her own personal media
brand. One sign that AOL has figured out Arianna's self-serving
strategy: A year ago she was stripped of control of
non-HuffPo-branded properties, including TechCrunch and
StyleList.
As we reported on AdAge.com in February when AOL announced its
revenue growth, domestic display-ad revenue at the company actually
dropped 3% year-over-year. The companywide revenue gains in the
fourth quarter came mostly from AOL's search business and its
third-party ad network business. (Ned Brody, chief of AOL's ad-tech
group, AOL Networks,
just quit; Armstrong named himself the acting chief.)
It's worth noting here that a huge chunk of AOL's operating
income still comes from the Membership Group. InfoWorld's Robert X.
Cringely recently characterized that division's purpose as "ripping off octogenarians" -- getting
them to keep paying for AOL dial-up service, even if they already
get internet through their cable or phone company, because they
don't realize they can keep their @aol.com email addresses for
free.
The AOL Brand Group -- the umbrella for editorial properties
including HuffPo, TechCrunch and local-news network Patch --
accounts for a comparatively tiny percentage of AOL's operating
income.
Hell, when you consider those ratios, Arianna Huffington's M.O.
doesn't seem so out of character. Pre-AOL, she took advantage of
the journalism produced by other organizations. At AOL,
for as long as she could, she took advantage of whatever resources
she could lay her hands on to fuel the expansion of her namesake
property.
Meanwhile, the entire content group at AOL, whose goal
is to be a next-generation media company, depends on it continuing
to take advantage of senior citizens too clueless to cancel their
dial-up accounts.
At 62, Arianna Huffington is just a few years away from being a
senior citizen herself.
My advice to Tim Armstrong: Keep a close eye on your
salt-and-pepper shakers.
Simon Dumenco is the "Media Guy" media columnist for
Advertising Age. You can follow him on Twitter @simondumenco.
