The impact of the AOL-Huffington Post merger

Marketplace Staff Feb 7, 2011

The impact of the AOL-Huffington Post merger

Marketplace Staff Feb 7, 2011


Kai Ryssdal: MapQuest. That’s what the whole Huffington Post-AOL deal is about, right? Arianna Huffington took $315 million from AOL because she just couldn’t wait to get her hands on AOL’s map site.

OK, so that’s not true. But MapQuest is one teeny little part of what is now to be called the Huffington Post Media Group. The Huffington Post gets some solid financial footing from the deal, news of which broke last night. AOL’s news operations get a shot in the arm. And we get Ken Auletta on the phone. He’s the media writer for The New Yorker magazine. Good to have you with us.

Ken Auletta: My pleasure.

Ryssdal: So this thing hit like a bombshell last night, much surprise. But in retrospect, is it really?

Auletta: No, I don’t think it was. Because the truth is each party had a real incentive to do a deal. In AOL’s case, all of their numbers in their quarterly reports that they’ve been issuing — including one as recently as a little over a week ago — show that the revenues were declining. Their subscribers were declining. And yet Tim Armstrong, the dynamic new CEO at AOL, had promised that you would see a positive turnaround at AOL in the second half of this year. And yet the numbers weren’t showing that way. So he had to throw a long pass and Huffington Post is a long pass.

Ryssdal: I read a post on GigaOM — the website — this morning that basically compared this move to the end of “Butch Cassidy and the Sundance Kid,” when Robert Redford and Paul Newman jump off that cliff with the Bolivian army behind them. Right?

Auletta: I wouldn’t compare it to that. I would compare it to a fourth quarter attempt to throw a touchdown pass. I don’t he’s jumping off not knowing whether he’s going to die when he lands, but he was challenged. AOL was challenged. On the other hand, Huffington Post had an incentive to do a deal in that any start-up company, if they want to expand, needs deep pockets and they didn’t have deep pockets. So they either had to go out to investors and raise more money or do an IPO or sell the company. And they chose to do the latter.

Ryssdal: With each side, then, getting what you said they want out of this deal, does Arianna Huffington sort of become the empress of the new media?

Auletta: No. She might like to portray it that way. She becomes more important though. I mean, she is editor-in-chief of all of AOL’s content properties — and that means not just Huffington Post, but it includes their hyper-local sites called Patch,there are over 800 of those; it includes TechCrunch and Engadget, and all the other things, MovieFone, all the other sites that AOL has. She has a much bigger platform today than she had yesterday, no question about that. But there are a lot of vibrant sites that are separate from AOL and the Huffington Post on the web.

Ryssdal: Is the $315 million that Tim Armstrong paid for Huffington Post sort of a big check for what is in essence a glorified, but well-curated blog?

Auletta: Well it’s a blog that A, has 200 employees. It’s a blog that claims it’s making money now. And clearly if you look at its growth of monthly visitors, that’s growing. Monthly hits, that’s growing. So Huffington Post is perceived as a new media darling the way AOL was a dozen years ago. The ironic thing here is that AOL is the old media company now buying into a new media company.

Ryssdal: Yeah, but here’s the thing. The last time AOL was involved in this big deal — when it was the new media company — in the AOL-Time Warner deal, we all know how that worked out and that was lousy.

Auletta: We did, and by the way we heard some of the same arguments. I mean at the time, Jerry Levin, who was the head of Time Warner, and Steve Case, who was the head of AOL, were literally saying 1+1=11 or 12. Which is exactly what Tim Armstrong and Arianna Huffington are saying today. They were great believers in synergy, so is Arianna Huffington and Tim Armstrong. Will those energies come to pass? Complicated, who knows. But we know this: What was overlooked in the AOL deal is that you were trying to combine two companies who had two very distinct and very different cultures. Is that true today between AOL and Huffington Post? We’re going to find out.

Ryssdal: Ken Auletta, he’s a media writer for The New Yorker magazine.

Auletta: Pleasure.

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