AOL buys HuffPost, Arianna in charge

Armstrong and Huffington

Tim Armstrong’s AOL is paying $315 million to buy Arianna Huffington’s Huffington Post, and she will be in charge of all of AOL’s digital offerings including TechCrunch, Engadget, MovieFone and Mapquest and the growing number of Patch local news websites.

Bloomberg quotes analyst Shahid Kahn of Morph Media as saying:

With this acquisition, Tim Armstrong is well on his way to transforming AOL into an online editorial-based content company … HuffPost gives AOL a very compelling, affluent, educated young audience. It further strengthens AOL’s overall editorial abilities with Arianna in charge.

David Brauer of Minnpost said some local Patch editors had their freelance budgets cut days before the HuffPost sale was announced:

Word is that's only a first-quarter "shift" in the toughest ad quarter and a snapback could come in April; still, going backwards so soon out of the chute has some Patchsters concerned. … Getting a new boss won't reduce the anxiety level any. 

Will Huffington, whose site only recently became profitable, goose Patch traffic with babe shots and other mindless eyeball-attractors as she does at her eponymous site? AOL's recently leaked strategy document is scarily realistic about the need for cheap content; HuffPo seems to fit; Patch doesn’t.

Technology analyst Rob Enderle told AP that the $315 million price was essentially "the hiring fee to get Arianna." Although he described the purchase as an "out-of-left-field" decision, he thinks the move "could put AOL back on the map." Although analysts say AOL's decision to buy Huffington Post is sound, Enderle warned that putting Arianna Huffington into a position of power could eventually threaten Armstrong's job security if AOL still struggles.

On a conference call with analysts, AOL Chief Financial Officer Arthur Minson said the company expects Huffington Post will generate $50 million in revenue this year, with a profit margin of 30%, according to AP. By comparison, AOL drew $2.42 billion in revenue last year. About 53% came from ads, and most of the rest from its dwindling base of dial-up Internet subscribers. Minson said the deal will save AOL $20 million a year by allowing it to eliminate operations that overlap with Huffington Post. (Photo credit: Financial Times)