My theory as to why Arianna Huffington would sell her successful website to a troubled company like AOL is that her investors wanted to cash in and weren’t particularly interested about the future of the Huffington Post.
Writing for the Guardian, Graeme Wearden says the beneficiaries of Huffington’s $315 million deal will be three venture-capital firms and a few private investors. Wearden adds that “some shareholders must be sitting on very large returns, as the company has received just $37m of funding over the last six years.”
HuffPo’s business model has three prongs: paid, original journalism by the likes of Howard Fineman and Sam Stein; extreme aggregation that summarizes off-site content so thoroughly there’s really not much reason to click through; and free content from numerous bloggers.
I’m guessing that the latter two prongs will be endangered by the acquisition, as media companies take a new look at HuffPo’s aggregation practices and bloggers who were willing to write for free for a site that they saw as somehow theirs balk at doing it for a corporation like AOL.
Check out this piece by Mayhill Fowler, HuffPo’s star of the 2008 presidential campaign, explaining last September why she would no longer write for free. Although I still think Samuel Johnson put it best.
Perhaps skeptics like me will be proven wrong, but I don’t see what AOL brings to the table. Yes, it has acquired content sites like TechCrunch and Engadget, and its hyperlocal Patch sites are springing up everywhere. But I don’t understand how adding HuffPo creates the “synergies” AOL chief executive Tim Armstrong is talking about.
Indeed, “synergy” has become a punchline from years past, with the ill-fated merger of AOL and Time Warner being a prime example.
Ken Auletta recently wrote a terrific story on AOL for the New Yorker, which, unfortunately, is not freely available online. Auletta portrayed AOL as a company that may be on the brink of financial collapse, and Armstrong as a smart, energetic leader whose content-heavy strategy may nevertheless prove to be flawed and outdated.
By far my favorite part of the story was the revelation that AOL still gets 80 percent of its profits from subscribers, and that perhaps 75 percent of them are older people who don’t realize they don’t need the $25-per-month service now that they have broadband. Not exactly a recipe for success.
With few exceptions, media sensations like the Huffington Post have their moments and then fade away. Arianna may prove she can defy gravity. But she has just made her job harder, not easier.