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 II: Helpful 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.

Bookmark and Share
Category: Blogging, Media Bias

Comments

  • http://www.thepiratescove.us/ William_Teach

    It begs the question, will AOL want to tone down the insane lefty rhetoric at the HuffPost? How will they respond when, say, something bad happens to a conservative, and the commentors are doing their normal “this is awesome!” routine?

  • Pingback: Just remember AOL owning it is OWNING IT « Da Techguy's Blog

  • JeffS

    Well, AOL lost $782 million last year. Either AOL is incredibly gutsy, or amazingly stupid.

    If this is just a move to bring Arianna Huffington on board AOL, as the linked article notes, I vote for “amazingly stupid”. Although Arianna is clearly no bumpkin, not if she squeezed this much out of AOL.

    Not to mention, you’re spot on, Stacy. Those 6,000 providers of free HuffPo content won’t all be happy about this, especially if the leftie H8R rhetoric is throttled back. That free content may become less free, thereby killing a significant portion of the HuffPo model.

  • Anonymous

    Stacy, I’ve found I can explain pretty much anything with one sentence:

    “Dilbert” is an operations manual……

  • Anonymous

    As a business proposition, this makes zero sense, Jeff. It’s one of the stupidest deals since the “irrational exuberance” of the dot-com bubble. (And the AOL/TimeWarner merger was arguably the stupidest deal of that era.)

    There is simply no way to justify it: Pixels ain’t that expensive. I understand that AOL wants to buy “eyeballs,” but they simply paid too much. If you want to make a killing on the stock market, go short on AOL.

  • Pingback: HuffPo Agrees to $315 million buyout from AOL … Hmmm | Scared Monkeys

  • JeffS

    I agree, Stacy, it makes zero sense as a business proposition. Yet….it happened.

    About the only way this deal MIGHT work is if their objective is a mixture of political and business. Huffington in charge of AOL, or at least exerting considerable editorial influence, might change AOL into a larger HuffPo, and potentially increase AOL membership, especially with lefties. AOL has been hemorrhaging subscribers for years (and for good reason), hence their losses. Call it the “Air America Plan”, although HuffPo is read by most parts of the political spectrum.

    Certainly her blog has been successful, although the scale of operations is considerably smaller ($5 million versus current AOL cash flow [hundreds of millions, at least]), but it’s a BIG difference! The change in level and intensity of operations will be significant.

    Betting that Huffington can bring to AOL what she brought to HuffPo is definitely a gamble. And a bad one; I may be wrong (I originally thought HuffPo was destined to crash&burn), but I’m pretty sure that Huffington. and her staff ain’t that good.

    AOL is desperate, and they have overplayed their hand. I think that the “Air America Plan” will eventually play out like its namesake.

  • http://wyblog.us/blog Chris Wysocki

    Who wants to lay odds that AOL is going to be the source of Keith Olbermann’s next paycheck?

  • Pingback: AOL Paid How Much for HuffPo? | The Lonely Conservative

  • http://twitter.com/LeatherPenguin TC Lynch

    Well, it took longer than I expected, the the Internet Bubble is about to be raised from the dead. If AOL isn’t immediately blugeoned by Wall Street, there’ll be a rash of this brand of crazy deals until it all explodes.

  • Anonymous

    BWAHAHAHAHAHA!

  • http://pointofagun.blogspot.com/ Dave C

    “Speaking truth to power” is it’s own reward..

    At least that is what the editors at the Puff Ho tell me..

  • Anonymous

    If AOL isn’t immediately blugeoned by Wall Street, there’ll be a rash of this brand of crazy deals until it all explodes.

    I expect AOL stock to sink like a stone. They simply paid too much. Hell, for $300 million, they could have bought a big slice of Twitter or some other technology that would help their bottom line.

    My guess — and it’s just a guess — is that this deal is really about AOL trying to sweeten the package for their eventual sellout to Google or Yahoo or some other company. But why should any company buy them out now when, given the obvious ineptitude of AOL’s management, the asking price will almost certainly be lower a year from now?

  • http://pointofagun.blogspot.com/ Dave C

    I seem to remember reading somewhere that Puff Ho was costing more to run than it took in..

    http://www.diggersrealm.com/mt/archives/003262.html

    http://www.parcbench.com/2009/10/16/the-huffington-post-deathwatch/

    It’s a few years old..

  • http://twitter.com/LeatherPenguin TC Lynch

    Stace, for that much money they could have bought an almost majority stake in the NY Mutts.

  • Pingback: Arianna Huffington and the Illusion of Inclusion | Goldfish and Clowns. Where God's not dead and neither are we.

  • Me

    RSM writes “Question: What would AOL have paid for the Drudge Report, which throws so much traffic it can melt down your servers?”

    Drudge melts servers alright, but it has to do more with the site’s annoying site refresh feature than with the overall qualitative traffic.

    “While the site’s [HuffPo: 26 million] number of visitors trail behind those of the New York Times, it exceeds those of online-based rivals such as the Daily Beast and the Drudge Report, according to estimates at ComScore Inc.”

    http://www.businessweek.com/news/2011-02-07/aol-acquires-huffington-post-in-bid-to-revive-ad-revenue-growth.html

    “The site trails the New York Times, which had 34.6 million Web visitors last month, while beating online-only rivals the Daily Beast and the Drudge Report, which had 3.7 million and 1.7 million visitors, respectively, according to ComScore Inc.”

    http://www.thespec.com/news/business/article/301216–huffington-post-website-turns-first-profit

    That Comscore number might be low, but even by 2008 HuffPo surpassed Drudge uniques according to Nelson, and since then HuffPO grew exponentially from about 2-3 million uniques to over 25 million uniques. (In 2005, HuffPo was 500,000 uniques). Drudge only grew marginally over the years (peaking only during the election seasons). Fwiw, even Quantcast shows HuffPo beats Drudge in the number of people who visit/month by 3 to 1 (40 million to 12 million).

  • Me

    Moreover HuffPost has younger and wealthy audience to Drudge’s older and less wealthy audience compared to the internet average.

  • http://www.therionorteline.com Michael

    For just over 50 million, AOL can have my site and I don’t even want a job.

    It is read by literally tens of people. – at least until I got some Rule 5 linkage, if that keeps up, I might get to twenties of people and then it’s gonna cost them…

  • Me

    Drudge melts servers alright, but it has to do more with the site’s annoying site refresh feature than with the overall qualitative traffic.

    That didn’t come out the way i wanted. The traffic “visits/hour” that drudge keeps boasting–like when he responded to reports in 2008 “HufFPo overtook Drudge”–is mostly because of the site’s auto refresh every few seconds. Drudge must be paying too much for his servers to keep them from melting.

    As to the external servers melting, obviously, when Drudge majorly highlights a link for a considerable period of time, his faithful audience are bound to click, even a 100 thousand clicks/hour can bring down site that are not designed for such traffic.

    Bottom line: don’t give too much credit for Drudge’s “traffic”, or even influence; its trending down year after year.

  • Me

    Drudge melts servers alright, but it has to do more with the site’s annoying site refresh feature than with the overall qualitative traffic.

    That didn’t come out the way i wanted. The traffic “visits/hour” that drudge keeps boasting–like when he responded to reports in 2008 “HufFPo overtook Drudge”–is mostly because of the site’s auto refresh every few seconds. Drudge must be paying too much for his servers to keep them from melting.

    As to the external servers melting, obviously, when Drudge majorly highlights a link for a considerable period of time, his faithful audience are bound to click, even a 100 thousand clicks/hour can bring down site that are not designed for such traffic.

    Bottom line: don’t give too much credit for Drudge’s “traffic”, or even influence; its trending down year after year.

  • http://pointofagun.blogspot.com/ Dave C

    How does this effect Noted pervert David Epstein?

  • http://ak4mc.us/2c/2011/ McGehee

    In the future, all media outlets like HuffPo and NBC will be owned by one man.

    One very, very poor man.

  • Anonymous

    Frank J quipped that this deal means that HuffPo is worth 315 million times more than Newsweek. An interesting contrast.
    http://www.imao.us/index.php/2011/02/random-thoughts-414/

  • Anonymous

    Don’t people still pay for AOL and won’t a lot of them be offended by much that is HuffPo?

  • http://twitter.com/LeatherPenguin TC Lynch

    More major media outlets track Drudge than any kiddies.

  • Pingback: Because I’m Stupid, You See : The Other McCain

  • Anonymous

    AOL stock dropped six bits today.

  • Pingback: HuffPo/AOL Deal: On Second Thought … Hell, No, It Still Doesn’t Make Any Sense : The Other McCain

  • Pingback: Ed Driscoll » Arianna Online: AOL buys Huffington Post for $315 million

  • http://thecampofthesaints.org Bob Belvedere

    Quoted from and Linked to at:
    What Is AOL Huffing?

  • CountVikula

    Drudge’s entire enterprise value is in Matt Drudge. If you lost him, Drudgereport would be impossible to value unless somehow managed to come in and do exactly what he does.

  • Pingback: Comparitive Over-Pricing « Obi's Sister

Performance Optimization WordPress Plugins by W3 EDGE