Posted on | May 6, 2012 | 21 Comments
Remember when AOL bought Huffington Post — for a “bazillion dollars,” as Joe Coscarelli says — and everybody’s first question was, “On what planet does this deal make basic business sense?”
Here you had the erstwhile America Online, which had made big bucks back in the original 1990s Internet boom, when dial-up modems were still the deal, before Gmail, before you bought high-speed digital access through your cable company (or logged on at free WiFi hotspots). Having failed to exploit its original massive footprint in the online world, AOL decided to buy HuffPo, a content provider that has “succeeded” — i.e., getting lots of page-views — without ever turning a profit on that traffic.
What’s the value of a money-losing content provider to a desperate declining online service provider? Such were the calculations required to make sense of AOL reportedly paying $315 for HuffPo’s estimated 25 million monthly “unique visitors.” Maybe you need an MBA to figure that out, or maybe I just didn’t do enough drugs back in the ’70s, because it made no damned sense at all to me. Reacting to the $315 million pricetag, I asked: “Did they misplace the decimal point?”
What it looked like, frankly, was the old pump-and-dump mentality of the Dot-Com Bubble era, hyping a start-up company to sell at an inflated price to an investor with more money than sense. And the suits at AOL certainly fit that description. As I noted at the time of the deal, AOL had reported losses of $782 million in 2010. These guys are experts at losing money, so therefore it made perfect sense for AOL to pay 10 times HuffPo’s 2010 estimated gross revenue (not profit, mind you, just revenue) and let Arianna “take control of all of AOL’s editorial content as president and editor in chief of a newly created Huffington Post Media Group,” with “oversight not only of AOL’s national, local and financial news operations,” but even such services as Mapquest.
As might have been expected, that bizarre arrangement couldn’t last long, and there was a report this week that Arianna’s vast powers have recently been somewhat curtailed:
Arianna Huffington acknowledged Thursday that her portfolio at AOL Inc. is being scaled back to include only the Huffington Post, undoing a structure put in place when her website was acquired by AOL last year. . . .
After buying the Huffington Post for $315 million, AOL gave Ms. Huffington editorial oversight of all its properties, including tech-news site TechCrunch, the patch.com network of local news sites, MovieFone and MapQuest. In addition, more than 30 AOL properties, such as Politics Daily, were absorbed by the Huffington Post.The management structure created tensions with staff at some of the properties. Patch management, for instance, differed with Ms. Huffington over strategy for the local news sites, according to people familiar with the matter. TechCrunch founder Michael Arrington quit in a public spat with Ms. Huffington.
Ah, remember that news last September? My headline at the time:
TechCrunch was a valuable property, because Michael Arrington was a valuable blogger, and the fact that he was willing to walk away from a brand he had created was one of those “Houston, we have a problem” moments, a signal that whatever skills Arianna Huffington brought to AOL, personnel management wasn’t one of them.
Successful people in online New Media tend to value their independence above almost anything else. They spotted a niche, created their sites from scratch and attracted a readership, and you can’t tell them how to do their jobs, because they invented their jobs.
Now try to imagine Michael Arrington, who sold his site to AOL for $30 million, being told a few months later that he’s now got to answer to this infamous Greek gold-digger. Not gonna happen.
The smart move was the one Matt Lewis made: Get the hell out.
Matt had been working for AOL’s Politics Daily, and within two days of the HuffPo buyout, he announced he was joining the Daily Caller, which I praised as a smart move for Matt: “Say what you will about Tucker, he doesn’t talk like Zsa Zsa Gabor.”
So, we return to the latest developments in the HuffPo/AOL marriage, reported by Keach Hagey at the Wall Street Journal:
The wider separation of the Huffington Post and the rest of AOL, however, has fueled questions about the Huffington Post’s long-term future at the company.
Ms. Huffington said Thursday that she had been approached by private-equity firms interested in buying the Huffington Post, although the overtures went nowhere. She said she had no intention of leaving. Her relationship with Mr. Armstrong is fine, and “all is good,” she said.
The change in Ms. Huffington’s role comes as AOL is facing a proxy battle with activist shareholder Starboard Value LP, which has criticized Mr. Armstrong’s strategy of investing heavily in online content.
Oh, yeah, baby: An investor rebellion against AOL CEO Tim Armstrong’s spending spree, and now Arianna’s shrewdly trying to peddle her wares to “private equity firms” — another buyout to pay her yet another tidy lump sum? She doesn’t stay bought very long, does she?
UPDATE (Smitty): welcome, Instapundit readers!
- Sept. 2, 2011: Arianna Huffington Fires Tech Blogger AOL Paid $30 Million to Buy Out
- Aug. 31, 2011: HuffPo ‘Premium’? AOL ‘Desperate’?
- May 24, 2011: News From the HuffPo ‘Veal Pen’
- May 5, 2011: Arianna Huffington Offers Exciting New Opportunities for You to Blog for Free!
- April 12, 2011: This Reminds Me of Stalingrad
- Feb. 22, 2011: ‘Gutfeld Claims He Was Offered His Fox Show Because of His Writing on HuffPost’
- Feb. 9, 2011: Out of the Frying Pan, Into the Fire: Matt Lewis Won’t Work for Arianna Huffington; Soon He’ll Be Working for Tucker Carlson
- Feb. 7, 2011: HuffPo/AOL Deal: On Second Thought … Hell, No, It Still Doesn’t Make Any Sense
- Feb. 7, 2011: AOL Pays $315 Million for HuffPo