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Huffington Post Deal Dovetails With AOL's Strategy

Ryan Faughnder |
February 7, 2011 | 12:00 p.m. PST

Senior News Editor

Media industry experts are weighing in on AOL’s $315 million acquisition of The Huffington Post, which AOL CEO Tim Armstrong described in an internal memo to employees as “another major step in the comeback of AOL.”

This deal not only makes The Huffington Post part of AOL’s larger media group, but also puts HuffPost founder Arianna Huffington in charge of all AOL’s content, which includes PopEater, TechCrunch and Engadget. While Huffington has led her own site to success, she has no experience running such a vast media empire.

This comes as Armstrong is trying to transition the company from a portal- and instant messaging-based business model to one based largely on web publishing.

AOL's stock dropped 3.14 percent by midday Monday.

“The changes are strategically in line with what AOL is trying to do already,” said Dorian Benkoil, senior vice president and editorial director of Teeming Media, a consultancy company for digital media organizations.

AOL will try to tap into The Huffington Post’s technical mastery of search engine optimization and content management, he said.

“They have created a successful modern media company based on aggregation, optimization and creation, as well as a very important social layer and the ability to link and monetize those links. I think that model is repeatable across the board,” he said.

According to a copy of AOL’s master plan, acquired by Business Insider, Armstrong wants AOL to “increase its story output from 33,000 to 55,000 per month, page-views from 1,500 to 7,000 and web optimization of stories to 95 percent. Stories are heavily vetted for their potential to draw advertising.

The Huffington Post will clearly benefit from the deal, Benkoil said.

“They get to continue to do what they do and preserve what they have while using the resources of AOL,” he said.

However, the deal is already drawing comparisons to AOL’s purchase of Bebo for $850 million, which became an investment disaster. Jason Calacanis, a blogging pioneer who built several websites before selling them to AOL, said this works out well for the internet provider. He now runs Mahalo.com.

“This is a fantastic deal for AOL,” Calacanis said in an email. “For half the price of Bebo, Tim has landed a site that matters, run by an editorial force – Arianna – sets the national agenda weekly during her 17-plus media appearances.”

“This gives AOL another killer brand to put on the top page of their advertising pitches,” he added.

Larry Kramer wrote in a Business Insider blog post that Huffington brings an “editorial soul” that was missing at AOL and preventing them from becoming a key competitor. Still, he expressed reservations over Huffington’s ability to succeed while in charge of the entire content side of AOL’s business.

To be sure, she is a force. But Ms. Huffington has succeeded largely in worlds where she is comfortable and informed: Politics, government, pop culture. She will now have control over all of AOL’s content operations and while that is a clear improvement over a business that effectively had NO editorial leadership, it’s unclear that Ms. Huffington can help build competitive operations in areas in which she has no history or background: general news, sports, finance and markets, the arts or many other areas AOL will need to excel in to succeed as a large scale business.

Other media critics say this is a bad move by the Huffington Post in the long run. “I’m disappointed in the Huffington Post. I thought Arianna Huffington and Kenny Lerer were reinventing news, rather than simply flipping to a flailing conglomerate,” Gawker’s Nick Denton told the Daily Beast.

He also wondered aloud whether or not AOL was becoming a “roach motel” for websites.

One point of speculation is whether or not the clear liberal slant of The Huffington Post will carry over into AOL’s content or if Huffington will steer her editorial content more toward the political center. In an interview on the Wall Street Journal’s MarketWatch blog, Armstrong argued that much of the HuffPost’s most traffic-driving content – especially celebrity and entertainment news, local news, and arts journalism – don’t weigh much on the political scale.

“I think there’s a number of issues that don’t touch political parties… So I think we had a major meeting of the minds on that,” Armstrong said in reference to his November meeting with Huffington in which they discussed the merger.

Huffington referred to it as “the surprising merger of our visions.”

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