AOL Is Buying The Huff Post to Build ‘New American Media Company’

In one of the biggest digital publishing deals in recent memory, AOL has agreed to pay $315 million for The Huffington Post, the pioneering web-only newspaper co-founded by Arianna Huffington six years ago.

A mockup of the The Huffington Post home page, featuring the news that AOL has acquired The Huff Post for $315 million. Photo: The Huffington Post

AOL has acquired Huffington Post for $315 million in its biggest move since it became an independent company in 2009. The acquisition will create a new online media conglomerate that already owns news websites TechCrunch and Engadget. According to The New York Times, the deal is worth $300 million in cash with $15 million in stock.

“AOL Inc. announced today that it has entered into a definitive agreement to acquire The Huffington Post, the influential and rapidly growing news, analysis, and lifestyle website founded in 2005, which now counts nearly 25 million unique monthly visitors,” according to the press release.

The deal will allow AOL to greatly expand its news gathering and original content creation, areas that its chief executive, Tim Armstrong, views as vital to reversing a decade-long decline.

As part of the deal, the Huffington Post co-founder Arianna Huffington will take control of all of AOL’s editorial content as president and editor in chief of a newly created Huffington Post Media Group.

The arrangement will give her oversight not only of AOL’s news, tech, women, local, multicultural, entertainment video and community content businesses, but also of the company’s other media enterprises like MapQuest and Moviefone.

The Huffington Post Media Group will also be in charge of AOL Music, AutoBlog, Patch, Engadget and TechCrunch. Huffington Post CEO Eric Hippeau and Chief Revenue Officer Greg Coleman will be leaving Huffington Post, according to AllThingsD.

“By combining HuffPost with AOL’s network of sites, thriving video initiative, local focus, and international reach, we know we’ll be creating a company that can have an enormous impact, reaching a global audience on every imaginable platform,” Arianna Huffington said moments ago in a blog post announcing the acquisition.

AOL now claims that the combined entity reaches 117 million unique visitors per month in the U.S. and 270 million worldwide. AOL CEO Tim Armstrong says the new organization will be “a next-generation American media company” focused on content, community and social experiences.

By handing so much control over to Ms. Huffington and making her a public face of the company, AOL, which has been seen as apolitical, risks losing its nonpartisan image. Ms. Huffington said her politics would have no bearing on how she ran the new business.

For The Huffington Post, a liberal blog that draws some 25 million visitors every month, the sale represents an opportunity to reach new audiences. For AOL, which has been looking for ways to bring in new revenue as its dial-up Internet access business declines, the millions of Huffington Post readers represent millions in potential advertising dollars.

AOL’s own news websites like Politics Daily and Daily Finance are likely to disappear when the deal is completed, and many of the writers who work for those sites will become the Huffington Post writers, according to the NY Times.

Although AOL is publicly traded, The Huffington Post is a private company and does not disclose its financial data. But Ms. Huffington said it had its first profitable year in 2010 and was poised to continue growing. The Huffington Post executives estimate that the Web site will generate $60 million in revenue this year, compared with $31 million last year.

“The price tag for The Huffington Post is pretty high but if it can continue to grow its audience at a high rate, than AOL should be able to monetise it effectively and increase its display advertising revenues,” said Ian Maude, head of internet at Enders Analysis.

“The purchase makes sense for AOL as it is focused on growing its display revenues, especially in the US market – where the HuffPo is most popular. By buying up several highly popular and highly social content sites, such as HuffPo and TechCrunch, AOL is hoping it can sell a premium content network to advertisers at a higher price.”

The Huffington Post has faced criticism over its content, much of which is aggregated from other news sources. But it has started to invest more in original reporting and writing, hiring experienced journalists from The New York Times, Newsweek and other traditional media outlets.

By acquiring The Huffington Post’s reporting resources, AOL hopes to counter the perception that it is a farm for subpar content. “The reason AOL is acquiring The Huffington Post is because we are absolutely passionate, big believers in the future of the Internet, big believers in the future of content,” Mr. Armstrong said.

“The potential is great; it’s almost overwhelming,” said Howard Fineman, the Huffington Post’s senior political editor. “But the key will be to engage people who really want to be engaged, and make it hospitable to them, draw them in and expand the sense of community without losing them at the same time.”

Analysts are waiting to see if AOL Inc. has finally invested well and whether a content-led recovery is possible. Mr. Armstrong, by their calculation, probably has another year of grace, to prove whether his website shopping spree will result in a significant display advertising uplift for AOL.

Admittedly sites like The Huffington Post, are much cheaper to run that traditional media companies – with far fewer journalists, (with many bloggers writing for free) and free of the legacy costs of print.

However, analysts all agree that traditional media companies should learn some valuable lessons from The Huffington Post. The site’s intelligent use of curation, social media, and comment has certainly blazed a trail in online media. [via Mashable, Ad Age, NY Times and The Huffington Post]

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