AOL Inc., the king of the Internet in the 1990s, is trying to revive itself in news and online advertising with a $315 million deal to buy news hub Huffington Post. The offer includes about $300 million in cash, and the deal likely will be completed in the spring, AOL said. The company, which was founded in Sterling, Va., has moved its headquarters to New York but still maintains a large Washington-area presence. Huffington Post co-founder Arianna Huffington, 60, will become president and editor-in-chief of the Huffington Post Media Group, which will include all Huffington Post and AOL content. AOL, led by Chief Executive Officer Tim Armstrong, acquired the TechCrunch blog and 5Min Media last year, investing in specialized Web sites and production of original video content to generate Internet traffic and attract advertising revenue. The number of unique visitors at closely held Huffington Post, which aggregates articles and publishes its own content, has grown to about 25 million a month since its debut in 2005.
“With this acquisition, Tim Armstrong is well on his way to transforming AOL into an online editorial-based content company,” said Shahid Khan, chairman and chief strategist at MediaMorph Inc., a New York digital media-tracking service. “HuffPost gives AOL a very compelling, affluent, educated young audience. It further strengthens AOL’s overall editorial abilities with Arianna in charge.”
Douglas Rushkoff, media theorist and author, was less sure.
Time Warner bought AOL at its peak and now history is repeating itself, he said. “Huffington Post has achieved a lot for Arianna Huffington,” he said. “She’s no longer some senator’s ex-wife, she’s on the map.” But the Huffington Post has peaked. Eighty percent of mergers and acquisitions fail, he said. “This is yet another example of a new media company getting money from an old media company, it’s just that now the shoe is on the other foot,” he told the Guardian.
AOL shares declined 75 cents, or 3.4 percent, to close at $21.19 on the New York Stock Exchange. The shares have declined 11 percent this year.
AOL is struggling with declining revenue in both its advertising and Internet-access subscription businesses. The company’s fourth-quarter revenue fell 26 percent to $596 million, with advertising sales dropping 29 percent to $331.6 million.
Huffington Post had revenue of about $30 million last year and has been aiming to triple that to $100 million in 2012, a person familiar with the company’s plans has said. The company posted its first annual profit in 2010, Huffington said in a conference call to announce the deal to investors.
The combination will create a group with about 270 million unique visitors a month worldwide and 117 million in the U.S., according to the statement. Huffington Post material will be integrated with AOL content, including Engadget, TechCrunch, Moviefone and MapQuest.
The purchase price is above the historical average for similar deals. Web portals such as the Huffington Post and companies like social networking site Facebook Inc. have been valued at about 1.5 times their revenue, according to the median of a dozen deals tracked by Bloomberg in the past two years.
The Huffington Post site has benefited as newspapers and magazines lose readers and advertisers to the more interactive experience of Web services. While the site’s number of visitors trails behind those of the New York Times, it exceeds those of rivals such as the Daily Beast and the Drudge Report, according to estimates by ComScore Inc.
