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Summary:

AOL has made the acquisition of The Huffington Post sound like a nice add-on for its existing content business, but the reality is that AOL had to do something dramatic, since traffic has been plummeting and losses increasing at some of its major media properties.

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Updated: When AOL CEO Tim Armstrong announced the $315-million acquisition of The Huffington Post several weeks ago, he made the deal sound like a nice strategic add-on for the former web portal’s content business — an expansion of the successful branded-media strategy the company has been rolling out for the past year. In reality, however, buying Huffington Post was something AOL had to do, because traffic has been plummeting and losses increasing at most of its major media properties, including the ones it has been banking on to help create a future for the company.

The dismal numbers on traffic to AOL’s major media brands come from comScore, noted in a report at Advertising Age magazine. For some AOL sites, the number of unique visitors in February (a much more precise measurement than page views) was down by more than 40 percent compared with the same month a year ago. AOL Games, for example, saw the number of visitors to the site drop by almost 50 percent (Update: An AOL staffer says that some of the assets of AOL Games were transferred to AOL Tech, which affected those numbers). Even more ominous was the decline in readership at sites such as DailyFinance and PoliticsDaily, two sites that AOL has been pinning much of its content hopes on.

Those traffic statistics help to explain why AOL shed more than 200 editorial staff in a massive round of layoffs on Thursday, a wave of cutbacks that totaled more than 900, or about 20 percent of the company’s total workforce, including most of the India division. According to several reports, many of the writers at DailyFinance and PoliticsDaily — some of whom were hired with much fanfare by the company last year — were let go.

For the past year or so, AOL has been trying to reinvent itself as a content company, using the river of cash its Internet access business continues to produce as a lever to buy assets like TechCrunch and video service 5Min Media, and finally The Huffington Post. It has also spent $100 million on building out its Patch.com hyper-local news operation to almost 1,000 towns and cities, and is expected to spend as much as $120 million more this year. As I’ve described before, Armstrong is feverishly trying to build new businesses that can replace the ones that are disintegrating, before the cash from its legacy businesses runs out and the company collapses under its own weight.

Assets like DailyFinance and PoliticsDaily were supposed to be part of the recipe for boosting traffic — and advertising — to AOL’s content sites, but that doesn’t seem to be happening (although unique visitors were up in February at AOL’s tech properties, which include TechCrunch and Engadget). According to comments made by Armstrong at a media summit on Friday, the news and finance sites were losing $20 million a year for the company. And advertising revenue at the company continues to decline at a fairly precipitous rate, dropping by almost 30 percent in the latest quarter.

At The Huffington Post, meanwhile, both traffic and revenues have been climbing. As I wrote in a post after the acquisition was announced, the site also brings two things to AOL that it desperately needs: an understanding of how much social networks and social features matter to new media, and a sense of personality and brand awareness that sites such as DailyFinance and PoliticsDaily — not to mention cookie-cutter sites like AOL Television and AOL Music — have so far failed to generate. Now all Arianna Huffington has to do is somehow graft all of that into AOL.

  1. It’s nice to get an unbiased take on this, since we’ll no longer get that from the AOL owned Tech Crunch.

    Come to think of it, we wouldn’t have gotten an unbiased take from them even before AOL owned them.

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  2. invitedmedia Friday, March 11, 2011

    i fear the term “cookie-cutter” is the new “blogger” when it comes to pejoratives.

    hope i’m wrong.

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  3. Patch really is starting to look like a colossal boondoggle.

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    1. It’s a colossal something, that’s for sure :-)

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  4. Lyle in Indiana Saturday, March 12, 2011

    Other than my legacy email account, I have little use for AOL or their content offerings. I stopped frequenting AOL for the same reason I stopped using MSN as my home page: it’s too biased. Their content is left-leaning, to say the least, and not open to differing opinions or even facts that dispute their position. I’ve sent emails to their “contributors’ to complain and the response was to tell me that they were opinion writers and not journalists. So, silly me. I went to AOL News for unbiased news reports and I was surprised when the content was merely liberal blogs with a few facts thrown in to support their position. As for sports, there are too many other good sites out there for much better reporting. Maybe AOL will pick up a boost from the Huffington Post readers but I think this venture will probably be as successful as the Newsweek-Daily Beast partnership. There will be some short-term gains but the long-term outlook does not appear to be very healthy for the new partnerships. Old problems and weak business models to not suddenly heal themselves by spending millions to add new content or hits to their site.

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    1. how in the world did u come to the conclusion that AOL news sites were liberal leaning? Are u sure u were on an AOL site? It is a frequent topic of discussion on the Huff and other sites about AOL conservative views and followers.

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  5. I have been an AOL subscriber for 15 years and have put up with many jeers from my family and other tech people for staying with AOL. I will be watching carefully the content with adding Huffington Post. I am expecting that I will soon be ditching AOL.

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  6. Well it looks like the people who invest money in these things have evaluated the acquisition and said thanks but no thanks. The stock has taken a beating since the acquisition was announced.

    It is not like associating with the Huffington Post would bring AOL any form of credibility. Let me see a liberal leaning AOL associating with a far left blog. Wow next they will seek to hire some of the “talent” from MSNBC.

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  7. this is an odd fit to say the least. AOL news sites(AOL sites in general) are without a doubt very conservative leaning, while the Huff is unquestionably liberal. I really see no good coming from this marriage

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  8. I was a bit surprised by the Uniques that are mentioned in report above (I get more traffic than that:)). So, I head over to the original report at “Adage”, and that mentions that these numbers are in thousands. Might have been a good idea to mention units here too :)

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  9. OMFG who is this bozo call Tim Armstrong? Ah, yes, a guy who used to work for Google as a marketing executive and has no idea on how to really run a company and now think he can turn AOL around by building content farms. Why did Aol hired this bozo? How much are they paying the bozo? I want to know. I read some of the comments here and I see I am not the only one maligned by AOL in the 90′s. I love the AOL name and it still has so much potential, but the Marketing bozo Genius continues to ruin it. Why didn’t he work instead by rebuilding the AOL Brand and put all the content on AOL main sites instead of creating a lot of trash sites which has no values. What AOL needs are Branding managers, some good engineers to develop products and some good SEOs(I will be back on this later).One way to reposition the company is to bring back the yellow aol guy, do some traditional advertising and sponsorship deals to put the company in the mind of the consumers. I do not understand why some companies just because they are online companies they feel they should abandoned old media advertising: Google Amazon, and Expedia still advertise on TV. Although not as much as the physical brands but a reminder is necessary. Google is creating buzz all the time. Some products launch here some announcement there. All may not work, but you’ll be damned if you have not heard from them. The same thing that befell Yahoo befell AOL. They should have sold the the thing to Microsoft and be done with. As for the Huffpost/aol deal I did not find it bizarre at all since the Huff is a hot mass of fanatic, political derange bunch, content copyright farmers, regurgitative summarizer and manipulative SEOs driving site, hence aol has to merge with them to survive. What I find bizarre mr. Mathew Ingram that you failed to mention is that there was talk at Google that they would change the search Algorithm because of content farms that started to clog and pollute Google search. Maybe you missed it by omission. You see AOL and its so called web properties is one of the many content farm sites caught in Google’s dragnet. Another thing I do not understand of the merger is the price paid for such drivel. Shouldn’t the FCC review these so call deals. One thing I am sure some of your readers might have observed like I did is that those drivel sites rarely made it to the Google news page. Why? because they are no good and people do not read them, but scan through them. Why the hell I should go to site like Huffpost to read an excerpt and then click on the link to read an article. WTF they dont pay the content creator to license it. I do not mind linking in the context of them writing their own articles and provide some perspective and then pointed me somewhere else for more information, but when you go to such a site to read about something and find out 2 or three lines then you have to go the original site for that information is disconcerting.

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