The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

AOL Pays $315 Million for HuffPo

Posted on | February 7, 2011 | 33 Comments

Curiouser and curiouser:

The Huffington Post, which began in 2005 with a meager $1 million investment and has grown into one of the most heavily visited news Web sites in the country, is being acquired by AOL in a deal that creates an unlikely pairing of two online media giants.
The two companies completed the sale Sunday evening and announced the deal just after midnight on Monday. AOL will pay $315 million, $300 million of it in cash and the rest in stock. It will be the company’s largest acquisition since it was separated from Time Warner in 2009. . . .
Arianna Huffington, the cable talk show pundit, author and doyenne of the political left, 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 national, local and financial news operations, but also of the company’s other media enterprises like MapQuest and Moviefone.

Question: What would AOL have paid for the Drudge Report, which throws so much traffic it can melt down your servers? But other questions come to mind:

Go over to Matt’s page at AOL’s Politics Daily, scroll down and you’ll see, “News From Our Partners” — which include Salon, Newser, The Daily Beast, Fox News, ABC, Time and The Week. What becomes of those partnerships? I dunno. But the news from AOL’s Daily Finance is simple:

AOL 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.

Twenty-five million uniques at HuffPo? Really? And that makes it worth (a) $315 million and (b) hiring Arianna as an executive editor?

Our own traffic has amounted to 200,000+ visits per month since August. Although those numbers aren’t the same as “uniques,” the data is public — it’s there on SiteMeter, available for analysis to anyone who cares to look  – and can be compared to any other site that makes its SiteMeter data public.

OK, so to get from 200,000 to 25 million, you just move the decimal point a couple of places over and . . . Big Fur Hat invites offers from AOL: “Wanna buy iOTW? We’ll allow you to overpay for us too.”

Which is exactly right: AOL paid waaaay to much for that site, and as for the value of Arianna Huffington’s services as an editorial executive: What are they paying her for that? Whatever it is, they’re paying too much.

I’m sorry: $315 million for 25 million monthly uniques? No, that’s crazy. The only way this deal makes any sense at all is as a bid to increase market share: AOL is buying out what had previously been a competitor for its own news products. That an online media giant is now buying up a content provider — and paying such an inflated price – is a signal of market confusion.

Speaking of confusion, Stephen Green asks: “Where did AOL come up with $315 million?

Good question. This deal smells like last week’s fish.

UPDATE: Further analysis at The American Spectator: “Did they misplace the decimal point?”

UPDATE IIHelpful background from Associated Press:

[AOL's] fourth-quarter results show it is still struggling to boost ad sales. AOL had just a 5.3 percent share of the U.S. display advertising revenue in 2010, down from 6.8 percent in 2009 . . . Facebook, meanwhile, accounted for 13.6 percent of display revenue last year, up from 7.3 percent in 2009. . . .
The work of [HuffPo's] 70-person paid staff is augmented by content from news outlets and 6,000 bloggers who write for free.

OK, now figure about $75,000 per paid staffer (salary+benefits), and your annual payroll is somewhere north of $5 million.

So the price paid by AOL is equal to more than 50 years of salaries at HuffPo? Whiskey Tango Foxtrot?

Next question: How many of HuffPo’s 6,000 bloggers (???) are going to continue writing for free at a site that just collected a $315 million buyout?

If AOL calculated those bloggers into the value of the deal . . . well, good luck with that.

UPDATE IV: Of course there’s a huge Memeorandum thread, via which we get John Hawkins:

The world’s not a fair place. Someone as incompetent as Barack Obama is President, The Black Eyed Peas got to play the Super Bowl, and Arianna Huffington is now worth $300 million dollars. That’s the breaks, brother, and we just have to roll with it.

To hell with fairness. What I’m wondering is, if HuffPo is worth $315 million, what’s Hawkin’s asking price? One meeeellion dollars?

UPDATE V: Da Tech Guy points out that AOL also just bought the legions of hateful HuffPo commenters, and Purple Avenger at AOSHQ notes further evidence that maybe AOL CEO Tim Armstrong isn’t the sharpest tool in the shed: Last year the company lost $782 million.

Think about that. I’ve done some stupid things in my life, but losing $782 million? No. Never did that.

UPDATE VI: Chris Wysocki in the comments: “Who wants to lay odds that AOL is going to be the source of Keith Olbermann’s next paycheck?”

Yeah, Scared Monkeys made a similar analogy: HuffPo as the MSNBC of AOL. The Lonely Conservative wonders how long before AOL demands a government bailout.

Professor Reynolds mockingly says the ridiculous price paid for HuffPo “means that InstaPundit’s valuation just skyrocketed,” when of course it means no such thing. Because this deal makes no sense as a business proposition, it cannot be weighed in as a factor for calculating the value of any other Internet property.

What has been proven, if anything, is that there is a sucker born every minute. But we knew that already.

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