5 Comments

Summary:

AOL dropped a bombshell on the online media world late Sunday night with the news that it is acquiring popular blog network The Huffington Post for $315 million. Here’s a roundup of some of the other commentary on the announcement from the web and from Twitter.

4743377708_89ec4853b4_z

AOL dropped a bombshell on the online media world late Sunday night with the news that it is acquiring popular blog network The Huffington Post for $315 million and will make founder Arianna Huffington its head of all things content related. Om is skeptical about the potential for the success of this merger, and I’ve written about my thoughts on the deal as well (I think it’s a pretty good arrangement for both, although its long-term success remains a question mark). Here’s a roundup of some of the other commentary on the announcement from the web and from Twitter.

The Atlantic posted the full memo that Arianna Huffington sent to bloggers at the network, in which she says that:

Together, our companies will have a combined base of 117 million unique U.S. visitors a month — and 250 million around the world — so your posts will have an even bigger impact on the national and global conversation. That’s the only real change you’ll notice — more people reading what you wrote.

This prompted a number of snarky comments from observers in the media industry about how the site had just cashed in to the tune of $300 million based largely on content produced by people who are paid nothing. Dan Gillmor, online media guru and author of the recent book Mediactive, was one of those who argued that Huffington should pay its bloggers now:

I’m hoping that Huffington will recognize how this looks and then do the right thing: namely, cut a bunch of checks to a bunch of the most productive contributors on whose work she’s built a significant part of her new fortune. They’ve earned some of the spoils.

A number of people took issue with the approach that both The Huffington Post and AOL use, which they said relies too much on search-driven keyword advertising rather than quality content. Hunter Walker of The Daily said that “AOL/Huffpo will [sic] an even more monstrous SEO sweatshop than either company is by itself,” while Jacob Weisberg, who runs the Slate magazine group, said:

Media consultant and author Jeff Jarvis, meanwhile, was one of those who liked the deal, saying it makes sense for both sides:

Making content for search is not, I believe, a growth strategy, as the more Google becomes personalized and successfully seeks out signals of quality and originality, the more SEO will die as a black art. So to execute on its content-and-advertising strategy, Aol needs brands with engagement. Huffington Post is that.

Felix Salmon of Reuters also liked the deal. “AOL gets something it desperately needs: a voice and a clear editorial vision,” he wrote, while Huffington Post gets “lots of money, great tech content from Engadget and TechCrunch, hugely valuable video-production abilities, a local infrastructure in Patch, lots of money, a public stock-market listing with which to make fill-in acquisitions and incentivize employees with options [and] a massive leg up in terms of reaching the older and more conservative Web 1.0 audience.”

Elizabeth Spiers, formerly of Gawker and now the new editor of the New York Observer, didn’t sound enthused about the merger, however, saying:

David Carr, the media writer for the New York Times, says that the deal is in some ways a flashback to the merger between AOL and Time Warner, which was about marrying the content of Time Warner with the online and digital savvy of AOL. Those synergies never came to pass, he says, but the combination of The Huffington Post and the former online portal is essentially a bet on the same phenomenon.

In a sense, the sale is a vindication of Mr. Lerer, who ended up on the sidelines after arriving with AOL in the wake of the Time Warner merger. He and others who were with AOL have maintained that the value of content in a new media world was vastly underrated and now he has a big fat payday to show for it, from his former employers, no less.

Ken Auletta was one of those who went for the obvious Super Bowl metaphor, calling the deal a “fourth-quarter Hail Mary pass” for AOL’s Tim Armstrong (Jeff Bercovici at Forbes went for that metaphor as well):

The game clock was ticking down on C.E.O. Tim Armstrong’s pledge to demonstrate by the second half of this year that AOL could mount a comeback from the near dead. AOL suffered a dismal last quarter of 2010, with revenues and traffic and subscribers continuing to fall. Quarterback Armstrong was not scoring with pledges to transform AOL into a content company.

Auletta — who wrote a recent feature for the New Yorker on Armstrong in which he noted that the company still gets the bulk of its revenue from people who pay for dial-up AOL accounts they probably don’t even use — also noted that the synergies of the deal are a large question mark, and involved the specter of the AOL-Time Warner, but not in a good way:

When Armstrong claims, as he did, that the synergies to be achieved by combining the two companies was the equivalent of one plus one equals twelve, I’m reminded of when AOL and Time Warner made similar claims for their 2000 merger. Beware. But by placing AOL’s content efforts under the Huffington Post umbrella, Armstrong demonstrates that he understands that AOL can’t win by gaining a few yards at a time.

Nick Denton of Gawker Media — which just launched a redesign aimed at taking the sites away from the blog-style format — was perhaps the most scathing about the merger (and that’s saying a lot). He told Dan Lyons at The Daily Beast:

I’m disappointed in the Huffington Post. I thought Arianna Huffington and Kenny Lerer were reinventing news, rather than simply flipping to a flailing conglomerate. AOL has gathered so many of our rivals — Huffington Post, Engadget, Techcrunch — in one place. The question: Is this a fearsome Internet conglomerate or simply a roach motel for once lively websites?

Lyons, meanwhile, said that the deal is “a slow-motion train wreck and will end in disaster.” The columnist, also known as “Fake Steve Jobs,” said that AOL was doomed because online content is about great stories, and “no great storyteller has ever been someone who started out by thinking about traffic numbers and search engine keywords.”

Emily Bell, former head of digital at The Guardian and now director of the Tow Center for Digital Media at the Columbia school of journalism, said in a piece for The Guardian that Huffington Post’s success “is driven by its position outside the establishment” and that as a result “AOL’s attempt to co-opt its culture could backfire.” MarketWatch founder Larry Kramer says that AOL may have lots of content, but it doesn’t have an editorial “soul” or personality, something The Huffington Post does have. But he’s not sure the merger will be able to transplant that to AOL.

AOL has spent mightily to build its content business, from Finance Daily to Patch, the series of hundreds of local news sites it is building. But it has done so without doing something essential to the success of any media business. It hasn’t build an editorial soul, or identity.

Rafat Ali, founder of PaidContent, wondered what Yahoo’s response will be, saying: “What’s next move for Yahoo post AOL-HuffPo? Will Ross look at Glam, or, lo behold, Demand (can it afford it at this point?)” And angel investor Keith Rabois noted that “Aol has now become a substantially more attractive acquirer for startups/entrepreneurs than yahoo.”

Related GigaOM Pro content (sub req’d):

Post and thumbnail photos courtesy of Flickr user Andy Flatman

  1. It’s a good deal for Huffington, but it’s irrelevant for AOL. Or it would be irrelevant if they were paying for it in stock, but instead they are burning up $300M in cash, which they will need at some point soon.

    This deal, and AOL in general, demonstrates why companies like Facebook and Twitter are over-valued. They all depend on general web ads, of which there are a seemingly infinite supply. The barrier to entry for creating a website is near zero, and just about any website can sell ads. Now Google and Microsoft (with Bing) at least have an advantage, as search engines provide a perfect audience for advertisers – people who are looking for specific information that they can match their ads with, not just people who happen to stumble on a website with ads on it.

    TV and newspapers have finite spaces for placing ads, and if you want to reach viewers of a specific show, you will compete with other advertisers, which drives the price up. If you are just looking for eyeballs on the web, and don’t care about the demographics of the page viewer, the price for advertising will drop as low as the cost of operating websites will allow. Which, when combined not only with the general growth of the web, but also with the flood of new ad-financed websites that are launching every day, will be very low. Low enough that profits will never meet expectations for most websites.

    The 90s dotcom crash happened because people believed a business model for running websites would eventually appear, but it didn’t materialize in time for many of them. A business model did eventually show up, but the more companies deploy it, the less it is worth. AOL can generate revenue from all of the content it owns, but whether there will be enough profit left over to justify the valuation they want is another story (most likely a sob story).

    Share
  2. I really liked Huffington’s coverage – hopefully things don’t chance now that Yahoo owns them. It’s good that Arianna Huffington will still be running things. Who can say no to 300 million?

    Share
  3. [...] recently, and AOL’s leading the charge with its low cost Seed.com service and, arguably, its $315 million buyout of the Huffington Post. Journalists roll their eyes at this stuff, but content farms — for better or worse — are hard [...]

    Share
  4. [...] Mary pass,” as The New Yorker’s Ken Auletta wrote — and reaction on the web (also summed up well by GigaOM’s Mathew Ingram) was decidedly mixed. The thumbs-ups came from a eclectic mix of [...]

    Share
  5. [...] recent sale of Huffington Post to AOL for $315 million has focused a lot of attention on the economics of online media. Many seem concerned that the sale [...]

    Share

Comments have been disabled for this post