Posted on | February 7, 2011 | 34 Comments
After this morning’s stunning news that AOL had agreed to pay more than $300 million to buy the Huffington Post, I tried to find some argument to justify the deal.
Honest, I did. I even read Felix Salmon’s analysis at Reuters:
The $315 million that AOL is paying for the Huffington Post is roughly 3X the valuation seen at its last capital raise two years ago, is 10X its 2010 revenues and is roughly 5X estimated forward 2011 revenues. Those are all big numbers, but not insanely so, for what is clearly a big strategic move on the part of AOL. After all, AOL has a market cap of $2.3 billion: right now it still dwarfs HuffPo. That might not be true in a few years’ time, if HuffPo continues growing at its current rate and AOL continues to lose subscribers and revenues.
My feeling, then, is that this deal is a good one for both sides.
Yeah, tell me another one, pal. HuffPo extimates its 2011 revenue at $50-odd million, but what about its net profit?
What’s that Felix? I can’t hear you for all these crickets chirping.
The only semi-rational logic behind AOL shelling out serious coin for HuffPo is the belief Huffington’s lightworker abilities will somehow draw ten bajillion visitors per nanosecond to AOL . . .
The market isn’t buying that argument and AOL stock, which was trading at $24 a share a week ago, is now down to $21 and change. The Wall Street Journal‘s Shira Ovide has a good analysis of this floptastic deal while my friend Donald Douglas examines, “What Huffington Post Means for Journalism’s Future.”
What it means, I suspect, is that the Left is willing to “invest” in liberal media ventures that are supposedly for-profit but which, in fact, lose money. Because, after all, whose money is being invested? Not theirs.
Five words: Government employee union pension funds.
That, I suggest, explains this whole deal. Private investors are now selling their AOL shares, while managers of pension funds for AFSCME, SEIU and other unions are buying AOL stock, thus providing the investment capital necessary to fund expansion of the Left’s online media presence in advance of Obama’s re-election campaign.
Yeah, and maybe George Soros is buying AOL stock, too, for all we know.
Call me a kooky conspiracy theorist, if you like, but when a business deal doesn’t add up as dollars-and-cents capitalism, there must be some other explanation. And if ever you see a turtle sitting on top a fence post, you know it didn’t crawl up there by itself.