AOL Huffington Post Takeover To Strengthen Pursuit of Online Media Content Crown

By: Money_Morning

Kerri Shannon writes: Internet company AOL Inc. (NYSE: AOL) announced late Sunday night it was buying liberal news Web site The Huffington Post to try to advance its reinvention as a top online media content provider.

AOL will pay $315 million for the popular site that was co-founded in 2005 by Arianna Huffington. The Huffington Post is privately owned by co-founder Huffington, Chairman Kenneth Lerer and a group of investors.

Huffington will serve as president and editor-in-chief of a new Huffington Post Media Group that will integrate content between AOL and The Huffington Post, covering news, technology, social media and other topics.

"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," Tim Armstrong, AOL's chief executive officer, said in a statement. "People navigate the Web by brand and The Huffington Post is one of the best content brands on the Internet."

Analysts think the new deal is a smart one for Armstrong as he continues his push to turn AOL into a leading online media content provider.

"With this acquisition, Tim Armstrong is well on his way to transforming AOL into an online editorial-based content company," Shahid Khan, chairman and chief strategist at digital media-tracking service MediaMorph Inc., told Bloomberg News. "HuffPost gives AOL a very compelling, affluent, educated young audience. It further strengthens AOL's overall editorial abilities with Arianna in charge."

Once primarily a political site, The Huffington Post has shifted away from that topic to broaden its scope, and politics is now only 15% of the Web Site's traffic, according to co-founder Huffington.

Critics agree that the news site's personality and execution is a needed addition to AOL's online family.

"To execute on its content-and-advertising strategy, AOL needs brands with engagement," media critic Jeff Jarvis wrote on his blog buzzmachine.com. "Huffington Post is that."

The Huffington Post offers one of the biggest online audiences for news and analysis. It beats out rivals The Daily Beast and the Drudge Report, according to marketing research firm comScore Inc. (Nasdaq: SCOR). The Huffington Post reached 25 million unique visitors in December, and the newly formed unit should serve about 270 million monthly users worldwide.

The site's encouragement of reader interaction has helped grow its online reach rapidly.

"People don't want just to consume news," Huffington told Bloomberg News in December. "They want to share it, they want to advance it, and add to it."

Some analysts think AOL can now make significant headway in the online media content market, partly crediting the decision to put Huffington and her editorial skills at the helm.

"If this acquisition works, 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," wrote buzzmachine.com's Jarvis.

The acquisition will help AOL regain some lost Web traffic and revenue as competitors continue to eat into the online media content market. Its ad sales fell 29% to $331.6 million in the fourth quarter of last year and revenue was down 26% to $596 million.

This is the latest in a handful of acquisitions AOL has completed as it tries to turn around its declining profit. Armstrong led the company on a shopping spree in September when it bought the tech-focused blog TechCrunch, video content site 5min Media and Web-based software builder Thing Labs Inc. While all three deals were small, they were intended to strengthen the areas of expertise that AOL can offer online information consumers.

Armstrong, who took over in March 2009, has employed a strategy that involves building an online audience with a network of specialty sites. AOL also operates consumer electronics Web magazine Engadget, movie site Moviefone, online directions source Mapquest and local news platform Patch.

"When people think about Google for search and Amazon for commerce, I think they're going to end up thinking about AOL for content," Armstrong said at a conference in 2010.

AOL is maintaining smaller deals in its more recent buying sprees, unlike its 2001 purchase of Time Warner Inc. (NYSE: TWX) in an all-share deal worth $164 billion. The deal is often referred to as one of the worst in history, and AOL spun off from Time Warner in 2009 after writedowns and a $100 billion charge.

Online media content providers like AOL are also stepping up their game and trying to reach consumers through the growing mobile world. Providers are trying to use mobile applications to filter the content each user receives, providing the most relevant news and information.

AOL recently announced its plan to release a personalized iPad magazine application called Editions, with the tagline, "The magazine that reads you."

Competitor Yahoo! Inc. (Nasdaq: YHOO), which is also suffering from declining revenue, is expected to announce later this month its plans to develop applications that will send personalized content to users' mobile devices. The company's revenue fell 12% last quarter and had to lay off over 4% of its work force in December and January.

Yahoo! plans to collect data from a user's set preferences as well as search items and social media activity to streamline information into the most relevant content for each user. It will create a mobile app for tablets and smartphones as well as make the feature available on Yahoo!'s Website.

Yahoo! CEO Carol A. Bartz also stressed the important role of apps in the company's future on the last earnings call.

"In our view, in the next three to five years, mobile activity will grow three to four times faster than PC-based Internet activity," Aggarwal Sandeep, an analyst with Caris & Company, told The New York Times.

Source : http://moneymorning.com/2011/02/08...

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