When AOL chief executive officer Tim Armstrong agreed to shell out $315-million (U.S.) for The Huffington Post, he was not just buying a news, gossip and opinion site. AOL is paying for the brand power of Arianna Huffington, the reigning monarch of online content.
And the 60-year-old editor, who created one of the Web's most popular news sites less than six years ago, says she is in it for the long haul.
"I told Tim that I want to stay forever," Ms. Huffington told analysts on a conference call Monday to discuss the deal.
For AOL, which helped popularize the Internet in the 1990s but has lately fallen on hard times, pairing up with The Huffington Post is a bid to revitalize itself.
Mr. Armstrong, a Google veteran, was brought in to turn AOL's fortunes around in 2009 as it prepared to be spun off from parent company Time Warner Inc. His strategy has been to shift emphasis away from being a provider of Internet access and toward being a content provider, relying more heavily on advertising dollars.
"The Huffington Post is one of the best properties on the Internet. I think it is widely recognized," Mr. Armstrong said on the conference call on Monday. "Our strategy ... is really around building a global media company that's built on high quality content that's engaging and magical for consumers."
The company bought popular technology blog TechCrunch.com last year, and owns other sites devoted to technology, the auto industry and gaming. But so far, it has struggled to boost its ad presence on the Web. In 2010, it brought in $1.28-billion in advertising revenue, a 26-per-cent decline from 2009.
On the call with analysts Monday, Mr. Armstrong said he expects the company to return to growth in operating profit, not including depreciation, in 2013. But in a research note Monday, Macquarie Capital analyst Ben Schachter forecast that it would take until 2014. "AOL remains a company in transition," he wrote.
The Huffington Post, which was founded with about $1-million in funding, started out mostly as a left-leaning political blog, catching readers' attention with a host of celebrity bloggers. It has since expanded to include far more celebrity and lifestyle content, ranging from a video of "Christina Aguilera's National Anthem Fail" to an essay about Jane Harman's departure from Congress to advice on how to overcome PMS. Much of the content is aimed at women, a key target for AOL's planned advertising growth.
In addition to diversifying its content, it has become an example of how to persuade online readers to direct traffic to a specific site, said Sree Sreenivasan, a digital media professor at Columbia's School of Journalism, who teaches a course with Huffington Post co-founder Kenneth Lerer.
"You need not just great content, but content that will be discovered and shared," he said.
The third founder of the site is Jonah Peretti, a viral marketing and social media expert who helped to shape the community aspect of The Huffington Post. Its vibrant (and highly moderated) comments section gets readers involved, and tracks the most popular stories - allowing readers to influence the amount of coverage each story receives.
Last week, AOL was heavily criticized when an internal presentation about the company's vision for the future was leaked by the website BusinessInsider.com. Outlining the "AOL way," it advocated a mechanistic approach, tailoring its content to what would be most noticeable on search engines, in a bid to rack up as much traffic as possible.
"I think [search engine optimization]will fade away as search becomes more personalized," said Jeff Jarvis, author of What Would Google Do? and associate professor and director of the new media program at the City University of New York's Graduate School of Journalism. "Arianna brings something else; she brings some humanity, people talking about content, curating it and passing it around. ... This is not the same AOL. Armstrong is trying to completely change what AOL has been. ... But he wasn't necessarily the content visionary, and she can build that."
Ms. Huffington has been open about the fact that she pays her reporters, but does not pay for opinion pieces. The tradeoff for bloggers is the massive audience they get in return. That allows "HuffPo" to produce content at very little cost.
AOL expects its new property to keep growing. The company predicts the site will draw $50-million in revenue this year and double that in 2012, as it pairs its brand with AOL's sales force. Ms. Huffington will be president and editor-in-chief of the newly-created Huffington Post Media Group, which combines the site with AOL's other media properties.
While political content now accounts for just 15 per cent of the traffic on the site, Ms. Huffington is known for her strong liberal stance, and AOL will have to determine how that affects its other brands. Meanwhile, HuffPo will have to work to retain its edge now that it is owned by a corporate giant.
"[AOL is]old-fashioned with a vengeance. So for an organization like that to take over the Huffington Post, which is as cutting-edge as you can get, is really a coup," said Paul Levinson, author of the book New New Media and a professor of communications and media studies at Fordham University.
"But it may not be as good a deal for The Huffington Post. Any time an independent news medium gets taken over by a bigger corporation, there's a chance it could blunt the identity of that smaller organization."