AOL and Huffington Post deal: first the praise...then the doubts (Analysis)
Well, is it the media deal of the new century...or a doozy, harking back to AOL's disastrous purchase of Time Warner? Opinion was sharply divided as news of the $315 million AOL deal to buy Huffpost percolated yesterday...
Ad Age said the deal was Armstrong's "latest and boldest attempt to transform he declining company from one that helped millions of people get onto the internet through dial-up connections to one that informs and entertains them in a broadband world. Armstrong himself called it, a "new American media company."
"Arianna, I think, represents something very significant," Mr. Armstrong told the mag in a call fromTexas where he and Ms. Huffington were awaiting the start of Super Bowl XLV in a luxury suite.
"The future of the internet will be a lot more driven by females, and it's great to have an entrepreneur of Arianna's stature. We wanted Arianna's voice at AOL, and for her to help us creatively."
Facebook’s chief operating officer Sheryl Sandberg described Arianna as "one of the pre-eminent authors and editors of our time." Bringing she and Tim Armstrong together with his record of business success, "creates tremendous potential for AOL,” she said.
Twitter co-founder Biz Stone said." Arianna’s expertise, empathy, and entrepreneurial enthusiasm forms a kind of alchemy, turning mere words and phrases into powerful expressions of humanity.”
Paul Carr, a technology journalist for TechCrunch, a website recently acquired by AOL applauded the deal ."It's a double whammy: a brilliant strategic acquisition at a logical price.” he said.
There was less enthusiasm in a poll launched by The Washington Post asking whether it was a good idea for the Huffington Post. . In early results, 16 per cent said: "Yes, AOL will expand the audience for the Huffington Post"; 84 per cent said : "No, AOL's ill-fated merger with Time Warner is still fresh in my mind."
In a Wall Street Journal blog, writer Shira Ovide said Tim Armstrong's job for nearly two years at AOL had been to right a sinking aircraft carrier (or maybe the Titanic).
"But we’re getting a little worried about Armstrong," she said.The new deal could be truly transformational, catapulting AOL into a new stratosphere of genuine media company but…" It still may be crazy."
"The Huffington Post deal is essentially Armstrong’s mea culpa that his own content-first strategy wasn’t working. The solution is to buy HuffPo and essentially turn over its own content strategy to HuffPo websites. "Get it? Huffington Post is taking over AOL"
Huffington Post’s revenue is tiny, and profits even more tiny, says Ovide. The price AOL is paying is about 6.3 times HuffPo’s projected $50 million revenue for 2011. "Not cheap."
She points out that newspaper company A.H. Belo -– owner of just four major daily papers — generated $119 million of revenue just in the third quarter of 2010.
"Yes, A.H. Belo’s revenue is shrinking and HuffPo’s is growing rapidly. But if nothing else, the fact that HuffPo is considered a wild digital media success story is a sign of how hard it is to mint money out of online ads."