Is AOL right to spend $315m acquiring Arianna Huffington and her website The Huffington Post?
AOL, once the company that defined the internet has continued its evolution into a content powerhouse with the acquisition of one the most popular news websites in the world, The Huffington Post, as well as acquiring its founder, Arianna Huffington.
The $315m that AOL will spend buying the site is a reflection both of the value of the website itself but also the value that AOL believe Arianna Huffington will bring to their content division. In just six years, she has grown the website from being a left leaning blog to a website with global reach that has started to define a new standard in aggregated journalism, that through its reach convinces more than 6,000 bloggers to contribute for free. Combined with AOL’s other properties, Huffington Post Media Group (as the new content division is to be named) will reach 270m people worldwide.
AOL, brought the internet to many in the 1990s. I can remember the way my life changed for ever when a CD-ROM (how old school) dropped through my parent’s letter box, offering us a one month free trial (plus phone call costs) to AOL’s dial-up service. AOL became the largest internet provider in both the USA and much of Europe, including the UK. As well as a pretty decent chat system, AOL offered users both access to the open web but also to a walled garden content rich system, content that in some cases could only be accessed by paying subscribers. It was therefore, the pioneer of the ‘paywall’ that Rupert Murdoch is currently trailblazing.
But, following a enormous merger with Time Warner, the company was slow to see that users wanted access to the open web, with free content. In the UK, AOL was overtaken by Freeserve, that offered very little content but didn’t charge users a monthly subscription, just the cost of phoning the dial-up number. AOL was squeezed by cable companies in the USA that offered much quicker internet access.
AOL’s current reinvention; launching new content websites and buying popular ones including TechCrunch and now The Huffington Post, are in effect a complete reversal of the company’s founding principles. Back then, it believed that consumers would be willing to pay for content, the model of Rupert Murdoch now. AOL today believes that by constantly ramping up page impressions, through offering vast arrays of cheaply produced, highly search engine optimised (SEO) content, it can operate a huge scale advertising network.
The Huffington Post is we’re told is profitable, but I seriously doubt that the acquisition price reflects the profits, it probably has more to do with the value that Arianna Huffington can bring to AOL. Her sprawling Huffington Post empire produces content very cheaply, with a staff of just 70. The content by its own staff is hardly original, it doesn’t tend to break news, instead aggregating news from multiple news sources. What it does do is amplify a story it picks up. It’s happened on a number of occasions with PinkNews, the news website I founded, and brought us a lot of new readers as a result. Much of the truly original content and comment columns are produced for free by bloggers who are happy to get exposure on the website and links to their own websites.
But, I question whether these writers will continue to do so now that they are no longer writing for a left of centre publishing phenomenon, but instead writing for a public company worth $2.3bn. Should they also share in the hundreds of millions that the Huffington Post has made its founders, after all, much of its success is down to them?
They’re not the only people who might lay claim to some of the millions, last month, Vanity Fair reported on a lawsuit by two individuals who claim to have come up with the idea of the Huffington Post website. Ms Huffington denies their claims.
The other question is whether this will work for AOL? The company is due to launch an iPad magazine – Editions – shortly, competing with the Rupert Murdoch owned The Daily. Murdoch’s News Corporation and AOL seem to have diametically opposing views on the future of journalism. Murdoch believes that journalists need to be paid (well) and that readers should have to pay to read their work. AOL believes in cheaper, or free journalism, where advertisers fund the running of the publication, not the user. As the two visions now go head-to-head in a much starker battle, AOL needs to prove that for once, after so many failed moves, they’ve finally understood the internet and how we use it.