7 Feb 2011

AOL buys into the ‘HuffPost’ for more than $300m

As AOL spends $315m on the news and comment website, The Huffington Post, Benjain Cohen says that part of the value is in acquiring Arianna Huffington herself.

Getting to know you - Arianna Huffington with AOL at the weekend (Getty)

So there is a future in the news business, after all. Tech giant AOL has just agreed a $315 million deal to buy the news and comment website Huffington Post – its biggest aquisition since it split from Time Warner in 2009.

It’s a huge deal for Arianna Huffington, who started the eponymous site just over five years ago, with an initial budget of just $1m – and turned it into one of the most widely-read news websites in the world. After the new deal it expects to reach around 270 million readers around the world. The former conservative Senator’s wife turned left-wing pundit will now be in charge of all AOL’s editorial content – including their local and financial news, and other media sites. She’ll even relocate from her Los Angeles home to New York to take up the helm.

The Huffington Post is one of the true success stories of the web – a liberal, left-leaning organisation which came in for much cricticism for simply aggregating reports from elsewhere in the web – in other words, taking content that other organisations had paid for, and re-broadcasting it for free. But it’s managed to bring together a compelling mix of political and lifestyle news, celebrity and media stories – and, most importantly, foster a new outpouring of citizen journalism – and tie ups with Facebook and Twitter meant articles could be cross-linked to a far wider and more diverse set of readers.

Our Technology Correspondent, Benjamin Cohen, writes: AOL - once the company that defined the internet - has continued its evolution into a content powerhouse with the acquisition of one the most popular news websites in the world, The Huffington Post, as well as acquiring its founder, Arianna Huffington.

The $315m that AOL will spend buying the site is a reflection both of the value of the website itself but also the value that AOL believe Arianna Huffington will bring to their content division. In just six years, she has grown the website from being a left leaning blog to a website with global reach that has started to define a new standard in aggregated journalism, that through its reach convinces more than 6,000 bloggers to contribute for free. Combined with AOL's other properties, Huffington Post Media Group (as a news content division is to be named) will reach 270m people worldwide.

Read Benjamin Cohen's blog - Is AOL right to spend $315m acquiring Arianna Huffington and her website The Huffington Post?

Crucially, it’s become much more than a news aggregate site – with a host of guest columnists ranging from Barack Obama to Robert Redford – from Madeleine Albright to Madonna. And it’s invested more in its own original reporting, rather than simply lifting other journalists’ work and reproducing it. In just over five years, Huffpost has managed to create a distinctive voice – one that its audience trusts and has proved eager to engage with – turning it from just another internet business into a highly desirable product.

Together with AOL, the new site could reach 100 million readers – all part of AOL boss Tim Armstrong’s plan to transform a downward sliding business into a huge media content hub: the more page clicks, the more ads – and, they’re hoping, the more cash. Last week’s quarterly returns by the company showed its ad revenue fell 29 per cent in the last quarter, whereas ad sales elsewhere on the web are starting to improve. Last year it laid off 2,500 posts – around a third of its staff.

“This is truly a merger of visions and a perfect fit for us.” Arianna Huffington

So both sides are pronouncing this a win-win situation – Huffpost had already rejected overtures from Yahoo and NBC Universal – but the $315m offer, for a company that’s only just started turning a profit, was clearly too tempting – and could allow it to expand beyond all expectations.

Announcing the deal on her blog, Ms Huffington wrote: “This is truly a merger of visions and a perfect fit for us…we are fusing a legendary and powerful new media brand with a vibrant, innovative news organisation, known for its distinctive voice, a highly-engaged audience, an expertise in community-building, and a track record for demystifying the news”.

And in an internal memo to AOL staff, Armstrong talked of creating a “high quality and diverse digital ecosystem”, describing Huffington as “one of the most successful entrepreneurs in the Internet space”, who’d managed to attract a highly-influential audience and inspire a highly-vocal community. AOL, he said, is playing to win: “Let’s go get it done”.

This deal is not without its risks – AOL has a distinctly-chequered career when it comes to mergers and acquisitions – the ghosts of Bebo and Time Warner loom large. And can a liberal blog site survive in such a relentlessly commercial environment?

A leaked strategy presentation, “The AOL way” – revealed in Business Insider last week – shows Tim Armstrong’s top motivation is driving up content and page views: this deal is all about traffic and revenue. He’s keen to tap into Huffpost’s sizeable female audience – as well as its opinion formers, describing it to staff as an “80:80:80 focus…80 per cent of domestic spending is done by women, 80 per cent of commerce happens locally and 80 per cent of considered purchases are driven by influencers”.

Predictably, the blogosphere is already resounding with hostile reaction – accusing Ms Huffington of “selling out” and returning to her right wing roots. But The Huffington Post insists its editorial content – and the unique voice that’s proved to be its unique selling point, won’t be affected.