It’s day two of the $315 million AOL-Huffington Post deal and the non-news just keeps on coming. On the same day that there was $16 billion in M&A, we’re still talking about a tiny deal for advertising inventory. Tim Armstrong’s deal isn’t really the issue.

The most important takeaway from the deal is the limited valuation. No one, not HuffPo’s venture money or AOL or anyone else in the internet business, sees advertising as a business with growing margins. The valuation on Huffington Post is low because of the insistence on cash and the dark prospects for advertising in a world driven more by Groupon than by simple display ads.

Ok. Fine. Pretty boring business stuff that belongs in a couple of inside stories on the advertising and media industry. Instead we get a fixation on Arianna Huffington and willful mis-reading of her figurehead role at AOL. Take a look at the Washington Post story on the deal:

Always-charming, ever-clever Arianna Huffington became something else in the late hours after the Super Bowl on Sunday: a shrewd and unimaginably successful businesswoman. [...] Rough estimate of Huffington’s personal cut of the deal: $100 million, virtually all of it in cash, according to Wall Street analyst Laura Martin.

Really? Unimaginably successful for making $100 million in a world where a 20-something kid is worth several billion? Journalists have such meager imaginations, I guess. There are a bunch of self-made billionaires who are women who were able to imagine more than that (Oprah, J.K. Rowling, Meg Whitman)–and dozens more women who are not billionaires.

More to the point, that $100 million makes no sense. The cash deal was driven by Softbank. Arianna said on CNBC that she took 25% in stock. She suggested others did too. Even if she took all of the stock, that would max her take at $60 million.

There’s been speculation that with so much money in her pocket, Huffiington would be eager to leave. But that view requires a suspension of any knowledge of Huffington’s career and personality. She’s no editor and certainly not a manager. Her goal in starting the Huffington Post was to build a platform for herself.

That has worked out beautifully. Huffington regularly appears on all the shows and a the big conferences (the formal offer was made at Davos, enough said.) To appease her vanity, Armstrong had to give her the titular role as Editorial Director or the whole company. With her speaking schedule and need to be in on “the conversation,” AOL’s other properties don’t have to worry about Arianna’s meddling.

Viewed from the perspective of Huffington’s own ambitions to be a meaningful public figure, the Huffington Post has succeeded far beyond what anyone (especially Tina Brown) thought Huffington could achieve. Though I’m sure it has fallen short of Arianna’s own imagination. Here’s a woman who saw that the right was over-crowded with leggy firebrands and pulled off a careerist conversion to rebrand herself as a leftist.

As an editor, however, no one can point to the writer she’s discovered and championed. Indeed, there’s no success that comes out of the Huffington Post in pure content terms. Here’s Jack Shafer on Huffington’s relevance as a journalist:

How to account for Huffington’s remarkable success? If you’ve ever edited Huffington’s raw copy (I have) or read a galley of one of her books before the published version comes out (which I’ve also done), you know that she’s not much of a journalist. But instead of impeding her, those limitations actually gave Huffington an advantage over other sites—Slate included—that hewed to old-media standards. Old-media types don’t feel right about rewriting the copy of their competitors and calling it a story. Huffington glories in carving the meat out of a competitor’s story, throwing a search-engine optimized (SEO) headline on it, and posting it. She even claims to believe that she’s doing the originator a favor by sending traffic back to it via a crediting link.

So Huffington’s relevance to journalism is nil. It’s all SEO page views. And there’s a reason that the New York Times, which has fewer uniques than the Huffington Post according to many of the press accounts, is worth a lot more than $315 million even in its hobbled financial state today.

Category: Financial Press, M&A

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

13 Responses to “AOL-Huffington Post: Why the Heavy Breathing?”

  1. Wuwei says:

    Reminds me of the dotcom boom era when seemingly insane amounts of money were being spent on seemingly worthless concepts, that turned out to be actually worthless. I find Huffington Post almost impossible to read. It has to be one of the worst Web designs of any major news site.

  2. BennyProfane says:

    That’s the problem with today’s world. Hoodied, T Shirt wearing geeks who are valued in the billions by yield chasers and Wall St. hustlers who bring no real value to the world (Facebook? Groupon? this is what America needs to revive? A huge, online yearbook and a glorified ValPack website?) are the standard that all other wealth is measured. 100 million is just so, pathetic, right? Ten years after the great Nasdaq crash, and this mentality is back with us. I guess mortgage salesman will be driving Ferraris again in a few years when that short memory kicks in.

  3. Fred C Dobbs says:

    “She’s no editor and certainly not a manager. Her goal in starting the Huffington Post was to build a platform for herself.” You got this right, but is also LUCKY.

  4. Greg0658 says:

    I’m getting back in the groove now the snows been shoveled and the chill is back ..
    I frequent HuffPo and have commented there too .. I do prefer this single column format web design* – 2col I can bear – 3 seems such a waste of btye flow .. a site the size of HuffPoAOL – the individual stories by an array of authors – I like the tidbit half paragraph to juice your curriousity force you to open for more (should be a bit more than what they provide – but say-la-ve)

    BenProf – I hear ya – Bueler Bueler Bueler

    On the deal – I don’t get it either – but I guess Arianna is owed something for getting people to login to the www and hang out* – then again “Arianna is owed”? what about Robert Reich or Matt Taibbi “click-cred” ? So just don’t know what is flowing in that payday.

    codas
    * – single column should be easier to rate & give 1/2 creds to – ie pausing at a story or the flyby
    ** – buy jazzed up graphic capable computers and FlashV9 and iPhone4s and high speed fiber-optic thru the alleys … oh the days of dialup 56K dedildadildeda and “You Got Mail”

  5. b00gn1sh says:

    >>
    So Huffington’s relevance to journalism is nil. It’s all SEO page views. And there’s a reason that the New York Times, which has fewer uniques than the Huffington Post according to many of the press accounts, is worth a lot more than $315 million even in its hobbled financial state today.
    <<

    Barry, the coming out party for Demand Media belies this sentiment. It may have since sunk under, but on the day it IPOed, DMD was worth more than the NYT. Demand Media is the poster child of SEO page views, and in contrast it makes Huffington's rag look like a bastion of high-minded journalism. There is a storm brewing just below (and occasionally above) the surface in the "write to Google" Search Engine leeching world of content generation, and once again AOL may be ringing the bell at the top.

    ~~~

    BR: Credit Marion Manneker for this post!

  6. TomL says:

    Arianna Huffington and Lisa Douglas (the late Eva Gabor’s character on “Green Acres”):
    twins separated at birth.

  7. 873450 says:

    AOL bought into Arianna’s aura; a clever, perceptive, articulate, populist leaning sensibility. But over time she compromised intellectual quality for content that attracted the wider, pop culture audience that increased her website’s valuation. Whereas once HuffPo could be counted on to consistently post exclusive, thought provoking, possibly controversial articles written by public figures like Jimmy Carter, Zbigniew Brzezinski and Henry Kissinger providing their unique, informed perspective on current events such as those transpiring in Egypt, today’s HuffPo viewer will more likely click to a disparate aggregation mash-up accompanied by an opinion piece from Sean Penn.

    Journalist? Let’s not forget the time Arianna recruited George Clooney for a HuffPo article and, as a suggestion, forwarded him an example she wrote herself. After Clooney told her he liked the article and agreed with her views, she published it and attributed it to him. When Clooney angrily denied authorship the blowback forced a public retraction and humiliating apology from Arianna.

  8. More to the point, that $100 million makes no sense.

    What do you expect? It’s AOL

    And there’s a reason that the New York Times, which has fewer uniques than the Huffington Post according to many of the press accounts, is worth a lot more than $315 million even in its hobbled financial state today.

    Yes, but most of the benefit to the Times comes from the zombified(those are the ones from any of the political spectrum that have stopped thinking and drink any koolaid that is put in front of them by their leaders) left

  9. wally says:

    Sour grapes… but maybe The Big Picture will yet have it’s day.

  10. How the Common Man Sees It:
    If the NYT is so left, why does it go running to the Government to share their copies of the WikiLeaks cables before publishing them?

  11. VennData says:

    Ariana had better share some with Kim Kardashian and Prince…

    http://www.huffingtonpost.com/2011/02/08/prince-kicks-kim-kardashi_n_820143.html

    …in fact, Kim’s everywhere in the Huffpost html…

    http://www.huffingtonpost.com/searchS/?q=Kim+Kardashian

    … if I were a value stock manager, I’d look for firms that are moving their business model towards all things Kim with the alacrity of Ariana.

  12. dankfu says:

    I can’t argue with the valuation of HufPo, but to assert Groupon’s defeat of display advertising is premature. No advertising exists in a vacuum. Groupon, Twitter, FBook, AND display ads are all part of the game.

  13. letterhead6 says:

    What some people don’t understand about demand media and NYT comparisons is that most advertisers don’t distinguish between content written by a pulitzer prize winner or a blogger. They want audience and ROI. Without the print revenue the NYT would not in any shape or form exist as the digital property it is now…which is why the valuations of demand media are higher than NYT.