AOL Bets on Huffington Post for $315 Million

Bikram Pandey
07 Feb, 2011
New York City

AOL in a largest deal since its separation from Time Warner in 2009 agreed to pay $315 million for the Huffington Post. Co-founder Arianna Huffington will retain editorial control and MapQuest and MovieFone and AOL

[R]8:30 AM New York – AOL in a largest deal since its separation from Time Warner in 2009 agreed to pay $315 million for the Huffington Post. Co-founder Arianna Huffington will retain editorial control and MapQuest and MovieFone and AOL’s regional and local news operations will be consolidated under her leadership.[/R]

AOL agreed to acquire news aggregator The Huffington Post for $315 million. The deal agreed on Sunday night and released on early Monday is likely to bring vast network of advertisers to a news site that is attracting nearly 25 million visitors a month.

AOL agreed to pay $300 million in cash and $15 million in stock and will consolidate its news aggregation and other content under the Huffington Post. The co-founder Arianna Huffington will retain control of the editorial content and will be appointed as president of newly created Huffington Post Media Group.

Huffington Post will also oversee Moviefone and MapQuest and also consolidate its local and regional and financial news content.

The purchase has confounded several media analysts. The rich price for the company that only generates $31 million in 2010 revenues and barely profitable after six years of operation has left many analysts wonder the rationale of the deal. AOL agreed to pay nearly one quarter of its earnings to acquire a news aggregator that has virtually no asset to speak of other than a surging traffic flow generated through social media sites.

AOL, in the largest deal since going public in 2009, has been struggling with the decline in dialup Internet subscribers and cut its staff by one third.

Huffington Post is widely known as a news aggregator with a liberal political bias and very little original content capabilities. However, recently the company has added staff from the legacy media organization but original content is not its strength.

The news content on the site has been mostly subpar and chatty that attracts user base through social media and blogger networks but rarely manages to hold on to visitors beyond two page views per visitor.

Huffington Post started as a liberal blog and evolved to attract 25 million monthly visitors as it invites readers to participate on discussion boards. Readers then link these discussion boards to their social media pages and attract more viewers.

AOL recently completed the acquisition of technology blog site TechCrunch for $25 million and 5Min Media that enables the creation of original video content.

AOL fourth quarter revenues declined 26% to $596 million and ad revenues in the period dropped 29% to $331.6 million.