Tim Armstrong and Arianna Huffington hosted a conference call with analysts this morning to discuss AOL’s announced $315 million acquisition of the Huffington Post. The Huffington Post is expected to contribute $50 million in revenues this year, and quickly ramp up to a $100 million revenue run-rate. That still represents a tiny portion of AOL’s $2.4 billion in revenue, but it is Armstrong’s largest acquisition to date, and his team believes it will help put AOL over the top in terms of putting the company on a growth track again by 2013 in terms of adjusted EBITDA.
It is clear that the deal is as much about buying into the new publishing model that the Huffington Post represents (which is in keeping with AOL’s acquisition of TechCrunch and emphasis on blogs like Engadget on the tech side). And it is about buying talent, both at the top and throughout Huffington Post on the editorial and sales side. Asked how long she plans to stay, Huffington says, “I told Tim I want to stay forever. This is my last act.” She has a multi-year contract at the very least, and AOL typically likes to structure deals with financial incentives that keeps top talent on board for at least two to three years. “Our only thing when we do acquisitions,” says Armstrong, “the price has to be fair, it has to fit the strategy, and the entrepreneurs have to stay.
Armstrong re-emphasized, as he did in an internal memo last night, that the driving factors behind the deal was how well the Huffington Post fit into the wheelhouse he is trying to build, particularly around women, influencers, and local (his 80-80-80 strategy). The Huffington Post was planning a massive expansion into both local and global coverage in 2011 as it was preparing for a possible IPO, and Huffington feels that the deal will help accelerate those plans. In particular she feels an affinity with Patch, AOL’s burgeoning local news properties. In terms of women’s content, specifically, Armstrong says it is “an area we feel the Web has been lacking, and Arianna is one of the world’s experts.”
Both the Huffington Post and AOL have been called out in the past for pursuing SEO-optimized content strategies (known internally at AOL as “The AOL Way”). But one point Armstrong tried to make is that AOL is pursuing multiple content strategies at the same time and will continue to do so. “The AOL Way is just one of the ways we are working on content.” It’s obviously going to be a mix of high-brow and low-brow going forward. “Our strategy is premium content and magcal experiences,” he says. “A lot of time that gets confused. Things like Seed and Studio Now are platforms to help you do whatever you want—high quality, low quality.”
I was able to speak with Armstrong and Huffington briefly after the conference call. Of course, my first question was, does she plan to leave Techcrunch and other strong brands alone or will all the properties now be subsumed under one brand. “At the Huffington Post our goal has been to turn our sections into destination sites. When you are given destination sites that is incredibly fortunate,” she assured me. “It is highly unlikely that TechCrunch, Engadget, or MovieFone will go away,” added Armstrong. In areas where AOL does not have distinct brands, however, those operations will be places where they make the most sense.
One of the draws for Armstrong beyond the media brand Huffington has built is the technology underlying the site. The Huffington Post has done an incredible job engaging its readers to become contributors through comments, blog posts, and social features. Huffington will be looking to spread some of that social DNA throughout the rest of AOL. I also asked about the different content management systems (CMS). AOL has been consolidating down from 24 to 2, and now HuffPo’s will be a third. That seems to be a TBD item, but it sounds like HuffPo will keep its CMS for a while, and the rest of AOL will keep consolidating.