Monday, March 7, 2011

AOL has completed its $315 million purchase of online news hub The Huffington Post. The acquisition is the latest move by CEO Tim Armstrong to reinvent the Internet icon as a go-to source for online news and other content.

This is the largest purchase AOL Inc. has made under Armstrong, a former Google advertising executive hired by AOL to engineer a turnaround.

Huffington Post is one of the top 10 current events and global news sites, with over 27 million U.S. visitors each month. The website covers a host of topics from politics to style to food, combining original work by Huffington Post's staff with links to articles and video from other news outlets.

The site has also become well-known for blog posts from celebrity contributors who work for free in return for a platform to express their opinions. Bill Gates and Robert Redford have written for Huffington Post as have several university presidents.

All told, AOL says the combined site will attract about 117 million U.S. visitors each month and 253 million worldwide.

The deal also adds Huffington Post co-founder Arianna Huffington to AOL managerial roster. She will run AOL's expanding stable of websites, which include popular technology blogs Engadget and TechCrunch, Patch.com's network of suburban news sites and online mapping service MapQuest.

Huffington, a media star in her own right, became a prominent public figure as the wife of a multimillionaire running for the U.S. Senate in 1994. At the time, she disavowed any interest in becoming a political candidate herself, but made an aborted run for California governor in 2003.

Armstrong has been trying to build AOL's online news business since he was hired to reshape the company in April 2009. The makeover is designed to attract more visitors to AOL's websites to help boost ad sales. AOL had just a 5.3 percent share of the U.S. display advertising revenue in 2010, down from 6.8 percent in 2009, according to eMarketer. Facebook, meanwhile, accounted for 13.6 percent of display revenue last year, up from 7.3 percent in 2009.

Armstrong has also slashed thousands of jobs in an effort to stem costs. Several unconfirmed reports have suggested that that the company will lay off more workers now that the Huffington Post purchase has closed.

Founded in 2005, Huffington Post was owned by Huffington, Kenneth Lerer and other investors. They will get $300 million of the purchase price in cash. The remaining $15 million will be paid in AOL stock.

On a conference call with analysts last month, 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 percent. By comparison, AOL drew $2.42 billion in revenue last year. About 53 percent came from ads, and most of the rest from its shrinking 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.

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