ANALYSIS: What happens when a once-mighty but now brandless portal is taken over by a sharp-elbowed left-leaning blog? That, and six other burning post-merger questions answered.
The newly announced $315 million marriage between the Huffington Post and AOL makes plenty sense on the surface, but how will it actually work?
We know that AOL CEO Tim Armstrong has been struggling to reinvent the once-mighty dial-up service and Internet portal as a scalable content company. We know that in just six years, Arianna Huffington has turned her lefty blog into a sprawling, vertically-integrated (and profitable) content machine.
But going forward, plenty of hard questions remain for both companies and their integration – Here are a few answers.
1. Will AOL now lean left?
It’s the first question many have been asking about the deal — it's also the biggest. Huffington told the New York Times on Sunday that politics "would have no bearing on how she ran the new business.”
Not everyone believes AOL's new mega-editor.
“This strikes me as strange, disingenuous, and about as credible as Roger Ailes claiming that Fox [News] is not a partisan-driven institution,” Salon co-founder Scott Rosenberg noted on his blog.
But, as Huffington herself pointed out on Monday, the majority of its traffic comes from apolitical content. “We used to be all about politics, now we’re not,” she said during a conference call. Huffington said politics accounts for just 15 percent of our traffic.
Still progressive media pundits, like Rosenberg, are hoping Arianna’s master plan is to “position AOL as a sort of Democratic alternative to Fox News.” And it would be a mistake if she didn’t.
“Arianna’s not going to be buying Glenn Beck,” Jeff Jarvis wrote. “Arianna must be Arianna.”
2. Is Arianna Huffington really going to be AOL’s new boss of content?
Plenty of people have pointed out the irony that Huffington is now, at least on paper, the boss of another outsized ego: TechCrunch founder Michael Arrington, who sold his blog company to AOL for $25 million last year. But the ego aspect of the deal wouldn’t concern me too much.
The bigger question is, will Huffington really do what her new job title, editor-in-chief of the Huffington Post Media Group, implies? That is, lead the editorial direction of AOL’s other big brands, like Autoblog, Engadget, Moviefone, Patch and PopEater?
I highly doubt Arianna is going to be sweating over the editorial direction of Mapquest. But Huffington says she wants to bring back comments on AOL sites, and claims that some of AOL’s current blogs — AOL Latino, Black Voices — “fill gaps” in HuffPo's current selection of verticals. (Sites like AOL's Politics Daily and Daily Finance are probably going away.)
But maybe that’s just it: Huffington is much more of a new-media brand ambassador than manager or nuts-and-bolts editor — and that’s why the deal makes even more sense.
“AOL now has a colorful, eye-grabbing editorial czarina,” Caroline McCarthy wrote on CNET. “A sort of 21st-century update to the newspaper barons of yore.”
And as Armstrong himself apparently told Huffington during their flirtation before marriage, AOL has “almost no brand identity.” Huffington “obviously gives AOL a much-needed editorial identity and cohesion," BoomTown’s Kara Swisher pointed out.
“I’ve told Tim I want to stay here forever,” Huffington said during the conference call. “I want this to be the last act of my life.”
Managing AOL’s public image is an act I can see Huffington thriving in for years.
“If this acquisition works,” Jarvis added, “it will be because Arianna really is the boss of content and gets to scale her vision and because AOL brings its key strengths — ad sales and capital — to what comes next.”
3. Will Arianna finally start paying Huffington Post bloggers?
“There are probably 6,000 bloggers on HuffPost by now,” former HuffPo CEO Betsy Morgan said on NPR Monday. “Those people are not paid.”
It doesn’t sound like they are going to be anytime soon.
In her initial e-mail to contributors, Huffington hinted that no changes in the “editorial approach” (i.e. bloggers write for free) are in the offing. “The HuffPost blog team will continue to operate as it always has,” she wrote, pointing out the new reach those who write for HuffPo will have. “That’s the only real change you’ll notice — more people reading what you wrote.
"Far from changing the Huffington Post’s editorial approach, our culture, or our mission, it will be like stepping off a fast-moving train and onto a supersonic jet," Huffington continued. "We’re still traveling toward the same destination, with the same people at the wheel, and with the same goals.”
That tact doesn’t sit well with many.
“It’s hard to imagine something that sends a more dismissive message,” Dan Gillmor, head of the Knight Center for Digital Media Entrepreneurship, wrote in a blog post. “I’m hoping that Huffington will recognize how this looks and then do the right thing: namely, cut a bunch of checks to a bunch of the most productive contributors on whose work she’s built a significant part of her new fortune."
4. Will HuffPo’s story aggregation — and link exchange culture — fly at AOL?
Aside from cheap labor, the other criticism of the Huffington Post through the years has been about the way it goes about aggregating (or as Rupert Murdoch calls it, stealing) original content from traditional news sources, like the New York Times, and smaller web properties.
For smaller sites, the traffic referred from HuffPo in exchange for a few paragraphs more than outweighs the blurry ethical and legal lines that HuffPo traverses daily. One wonders whether or not those blurry lines of aggregation will be tolerated at AOL.
5. Are portals dead? Does Yahoo now buy the Daily Beast?
“Portals are burned toast,” Jarvis wrote. “Making content for search is not, I believe, a growth strategy, as the more Google becomes personalized and successfully seeks out signals of quality and originality, the more SEO will die as a black art.”
To maximize content that advertisers will want, Jarvis said, portals need “brands with engagement.”
So does this mean Yahoo’s move to counter Arianna-OL will be to buy the Daily Beast? After all, Yahoo was reportedly in sales talks with Huffington for HuffPo before Armstrong came calling (NBC and MSNBC were, too).
Perhaps, but for one thing, the Daily Beast has its own merger integration with Newsweek to deal with.
The main problem for Yahoo and other portals looking outside for recognizable, scalable blog content companies to buy: there just isn’t another HuffPo out there.
Gawker Media would be an exception, but chief Nick Denton claims his network of blogs is not for sale. “I thought Arianna Huffington and Kenny Lerer were reinventing news," Denton told the Daily Beast, "rather than simply flipping to a flailing conglomerate."
6. What happens to AOL's Seed? And Patch?
Patch — AOL’s massive foray into hyperlocal news — doesn’t appear to be going anywhere. For starters, it’s one of Armstrong’s prized pet rocks. He’s invested a reported $120 million in Patch so far. And AOL, which launched Patch in 2009, has been aggressive in its expansion. (Patch currently has more than 500 sites in 19 states and claims it was “the largest hirer of full-time journalists in the U.S.” in 2010.)
The more interesting question is, what will become of Seed, AOL’s stab at low-cost, high-volume, SEO-friendly content? For the moment, Armstrong and Huffington say that Seed will now be able to grow faster now with the help of HuffPo social technology.
And finally …
7. Is this a “Hail-Mary pass” from Tim Armstrong? And will it result in a touchdown for shareholders?
Yes, and “it's a pass AOL should absolutely be throwing at this point in the game,” Henry Blodget wrote on Business Insider. “To not throw this pass would mean just giving up and quitting. AOL's traditional business is dying. If it does nothing, it will get sacked deep in its own territory, and the game will end.”
As far as the shareholders go, the end game remains to be seen. AOL had $725 million in cash on hand at the end of 2010 — and there has been some off-the-record chatter that spending $315 million of it on HuffPo is too risky.
AOL CFO Artie Minson said in a memo advising investors that the company expects HuffPo to make generate about $10 million in net profits in 2011 on $50 million in revenue.
So far, Wall Street seems nonplussed. AOL shares fell 3.4 percent during Monday trading, closing down 75 cents at $21.19 per share.
That’s not terribly alarming, though Rosenberg warned: “Huffington is to AOL as AOL was to Time Warner.”
Only time will tell if he’s right.