What Can Arianna Huffington Do for AOL?

Feb. 7, 2011 — -- When it comes to AOL, it's probably no longer mail you're getting but online news, and if all goes according to a multimillion-dollar plan announced today, it'll be news according to Arianna Huffington.

Since hiring former Googler Tim Armstrong as chairman and CEO in 2009, the one-time dominant force among dial-up Internet providers has tried to regain its command over online Americans with a content-first approach.

Over the past few years, AOL announced plans to hire hundreds of journalists and built up its stable of websites to include a network of local news sites called Patch, as well as big-ticket blogs such as TechCrunch, PopEater and Autoblog.

Early this morning, the Internet company revealed its biggest catch yet -- online news site The Huffington Post.

Analysts say Huffington, the site's eponymous co-founder and editor-in-chief, may be just as significant a get as the site itself.

In a $315 million deal, AOL said it would not only buy the successful online news site, but appoint Huffington president and editor-in-chief of "The Huffington Post Media Group," which will join all Huffington Post and AOL content, including Engadget, TechCrunch, Patch, Moviefone and more.

"What AOL has really struggled to do is create media properties that can build new audiences," said Nicholas Carlson, deputy editor at Business Insider. "That's something the Huffington Post has done really well."

It's that track record of building the property that AOL hopes translates to the new combined brand.

Citing comScore data, AOL said in a press release on the acquisition that The Huffington Post's "affluent, influential audience" grew 22 percent from December 2009 to December 2010. Those numbers indicate a level of audience engagement that industry watchers say AOL has been scrambling to get on its own.

"I think she brings a lot of courage in facing the future," said Marshall Kirkpatrick, vice president of content development and lead writer for the technology blog ReadWriteWeb.

As AOL's revenue stream changes from one that relies on old dial-up subscriptions to content, Huffington's insights from growing her own news site could put AOL in a strong position, Kirkpatrick said.

"Content is a tough bet, but it's a stronger bet than old-school subscribers," he said. "They've got a winning formula there. They have some original, high-quality journalism mixed with a lot of aggregation and a healthy does of exploitive, prurient content which has got to subsidize a lot of the other content they have on the site.

"For all its high-mindedness, the Huffington Post has proven that it knows how to get down and dirty in aggregation and pandering to large audiences."

Is Huffington Deal About the Website or the Person?

Last week, Business Insider published a "leaked" copy of The AOL Way, an internal document ostensibly outlining Armstrong's "master plan" to turn the company into a content-oriented online destination. Among its key points: traffic potential, revenue potential, boosting total story output and search engine optimization.

If AOL has now found in Huffintgon someone who's more than a figurehead and understands the key levers of the Web and how Internet media works, "it's a smart acquisition," Carlson said.

But if Huffington is only lending her brand to AOL and the acquisition is really just about a website, he said, "Then it's just an incremental addition to AOL's audience."

In a post today on the acquisition, Carlson said Huffington Post insiders say that Huffington was more than a famous face for the site. She leveraged her network of high-profile friends and dove into the news site's nitty-gritty.

Andrew Frank, media analyst for research firm Gartner Inc., said the acquisition of The Huffington Post shows that the future of content-oriented online publishers is to become more like holding companies.

Just as mainstream companies, such as Viacom and Disney (ABC News' parent company) encompass a number of independent brands, Frank said AOL is becoming more of an umbrella company than a single identifiable brand. And, he added, Huffington's track record in Internet publishing bodes well for AOL's future there.

"The good news is she's clearly shown herself to be not just a pundit but a knowledgeable business woman who's seen as an icon of success in Internet publishing, which is pretty rare," he said. "I think she has a good deal of credibility going into the role."

Will Huffington's Politics Influence Other AOL Properties?

Although Fox News described AOL's Huffington Post acquisition as veering "left," Frank said he doesn't expect Huffington's politics to spill over into the additions to her editorial empire.

"I suspect that the reality is going to be that they maintain diversity and balance. I don't think it's necessarily in anyone's interest to inject too much politics into the broad portfolio," he said.

But though Huffington and her news site might ultimately return AOL to Internet influence, the stock market didn't respond too favorably to the news today.

By midafternoon Monday, AOL shares were down about 3.3 percent to $21.21 per share.

"This is not a take-over-Yahoo Hail Mary pass, but, judging by the stock's reaction, it is possibly some people's definition of a Haily Mary pass that Tim Armstrong said they wouldn't do," David Joyce, media analyst for Miller Tabak, LLC, said in an e-mail.

Still, he said, The Huffington Post is "a strategic content fit that could accelerate the path to profitability for some of AOL properties."