SAN FRANCISCO — AOL's $315 million deal to buy news hub Huffington Post signals it is serious about building its profile as a media company as its legacy dial-up Internet business dies away.
The acquisition announced Monday is AOL CEO Tim Armstrong's most aggressive play so far as he tries to reshape a fallen Internet icon and boost efforts in news and online advertising. It is the largest purchase the company has made under Armstrong, a former Google advertising executive hired by AOL to engineer a turnaround.
The Huffington Post ranks as one of the top 10 current events and global news sites and draws 25 million U.S. visitors each month. It has built its popularity by compiling news from a wide selection of other media outlets, with links to articles and video on everything from politics to style to food. The site combines that type of aggregation with original work by its own small staff and blog posts from celebrity contributors who work for free in return for a platform to express their opinions.
But just as important as gaining the site itself, the deal adds Huffington Post co-founder and media star Arianna Huffington to AOL's management team. Once the deal closes later this year, Huffington will run AOL's growing array of content, which includes popular technology sites Engadget and TechCrunch, local news site Patch.com and online mapping service MapQuest.
Although some analysts say that AOL is paying a lot for the Huffington Post brand, Benchmark Co. analyst Clayton Moran believes the price isn't a huge hit for the company in the short term, especially since it helps put to rest any question that AOL is now an online media company. Bringing Huffington Post to AOL gives it access to quality content and will drive new users to its site, replacing those the company has lost over time, he said. And the price is essentially "the hiring fee to get Arianna," technology analyst Rob Enderle says.
Huffington Post grew quickly from startup in 2005 to online colossus. Over time, it launched city-specific pages and developed a roster of sections such as food and books. The work of its 70-person paid staff is augmented by content from news outlets and 6,000 bloggers who write for free. Outsell Inc. analyst Ned May said the Huffington Post "has done a fantastic job of building content creation. And AOL can monetize it."
AOL sorely needs to. The company rose to fame in the '90s with its dial-up Internet service, managing to buy media company Time Warner in 2001 at the height of the dot-com boom. The corporate marriage never really worked, though, and AOL's main source of revenue began drying up as consumers flocked to speedier broadband Internet connections. After nearly a decade of attempts at integrating the two, Armstrong was brought in to prepare AOL to separate from Time Warner, and the companies split in December 2009.
Both parties clearly feel optimistic about this deal. In an interview Monday, Arianna Huffington said it seemed like the right move because she and Armstrong share the same vision for online content. She first spoke with Armstrong at the Quadrangle Conference in New York in November, where they were nearly finishing each others' sentences when talking about where they saw their companies going.
"I see this as a real acceleration of the goals that Tim has had for AOL and I have had for the Huffington Post," she said.
In a separate interview, Armstrong said the deal is a "tremendous opportunity" for AOL that brings an influential audience that is attractive to advertisers. "Last year was about the turnaround; this year is about the comeback," he said.