AOL to buy Huffington Post for $315m

AOL to buy Huffington Post for $315m
By Matthew Garrahan

February 7 2011

AOL, the US internet company, is making a big bet on the viability of free online content by agreeing to buy the Huffington Post, the left-leaning web operation started by Arianna Huffington, for $315m.

The deal, which was announced late on Sunday night, is the latest and most significant step AOL has taken to becoming a serious player in advertising-supported internet content.

“The acquisition of The Huffington Post will create a next-generation American media company with global reach that combines content, community, and social experiences for consumers,” said Tim Armstrong, chairman and chief executive of AOL.

The deal represents a big pay-day for Ms Huffington, a popular political pundit who owns a significant stake in the Huffington Post. Under the terms of the acquisition, she will run a new AOL division which will integrate all AOL and Huffington Post content. “Arianna is a singularly passionate and dedicated champion of innovative journalistic engagement,” said Mr Armstrong.

AOL has been building a network of specialist sites, including TechCrunch, the technology news and reviews site, Endgadget and Patch. But the Huffington Post acquisition is the biggest yet and will give AOL access to one of the web’s largest audiences for a news web site.

The Huffington Post was started with backing from several liberal supporters, including the comedian Larry David, the creator of Seinfeld, and David Geffen, the film and music billionaire. Since the site was launched in 2004, it has built a monthly audience of nearly 25m monthly unique users who visit the site for its blend of comment, blogs and news – which often comes from other sources around the web.

“By combining HuffPost with AOL’s network of sites, thriving video initiative, local focus, and international reach, we know we’ll be creating a company that can have an enormous impact, reaching a global audience on every imaginable platform,” Ms Huffington wrote on her site on Sunday.

AOL came to prominence in the internet boom of the 1990s, offering dial-up internet and email services. But those businesses have matured since the advent of broadband internet, which has forced the company to change tack.

Mr Armstrong, a former Google advertising executive, was appointed chief executive in 2009 and under his leadership the company has been trying to re-invent itself as a hub of specialised online content. “When people think about Google for search and Amazon for commerce, I think they’re going to end up thinking about AOL for content,” he said at a conference last year.

However, AOL has a patchy track record in mergers and acquisitions: it sold ICQ, the instant messaging service, last year for $187.5m – less than half of what it paid for it in 1998. It also made a big loss on Bebo, the social networking site it bought for $850m in 2008, reportedly selling it for less than $10m.

The company’s biggest deal was also widely regarded as the worst in history. It acquired Time Warner in an all-share deal worth $164bn in 2001. It was supposed to marry the best of old and new media but anticipated synergy failed to materialise and a string of write-downs followed – including an eye-watering $100bn charge only a year later. AOL was eventually spun out of Time Warner in 2009.

Copyright The Financial Times Limited 2011.