Thursday, February 10, 2011

AOL buys Huffington Post - What does it mean? (Updated & Bumped)

Last week saw the announcement of AOL's acquisition of the Huffington Post for $315 million, about seven times the Post's estimated annual revenues, and more than three times its last public valuation of $100 million in 2008.  Does this reflect the growing strength of online news, the continuing decline of the media giants, or something different?
AOL has been struggling to find a new identity since the end of its disastrous merger with Time/Warner, and has seen declining revenues in recent years, and has yet to see the breakout hit in its myriad offerings and acquisitions.  Reports suggest that AOL was looking for journalistic credibility - if so, the acquisition of a site more known for left-leaning political commentary than straight news looks like another blunder by AOL.  It might be a better move if the goal is, as AOL's chief, Tim Armstrong, said that the deal is part of a long-term strategy to reach "an influence audience." 
The deal is certainly advantageous for the Huffington Post's founder, Ariana Huffington, who will now oversee all of AOL's content (including Engadget, Mapquest, Patch, etc.) and gets to cash out, big-time.  One long-term question is whether she can successfully oversee such a broad range of content and services profitably. Perhaps more critically, will the Huffington Post's (mostly unpaid) writers continue to contribute freely, now that it's owned by one of those "money-grubbing big corporations" they rail against.  Will they now want to be paid (which will upset the current business model), or just find somewhere else to go with their material?
So is this another bad business move on the part of AOL, an effort by big business to influence public and political debate, or the future of media content?  What do you think?

UPDATE:  Sources report that Arianna Huffington is pulling $18 million from the sale, and more than $4 million salary with her new position at AOL. And from one pundit - "profiting off the unpaid labor of her digital sweatshop" (as noted above, most Huffington Post contributors are unpaid)..

UPDATE: There's early indications of how the business and financial world see this acquisition.  Since Feb. 1, AOL stock prices have fallen to the point where AOL's market value has dropped a total of $315 million, which happens to be the price it paid for the Huffington Post. 
The same NYPost story puts the value of the deal to the two HuffPo founders (Huffington and Ken Lerer) at $80 to $100 million.


Sources and for more information, see:

"AOL-HuffPost: All The News Fit to Merge," Business Insider
"AOL+HuffP0: A Quick Trip to the Future?" Online Spin
"You Can Make Friends, But AOL Wants to Influence People," Online Media Daily
"AOL stock sheds $315M - HuffPo price tag" NY Post

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