AOL’s big gamble on acquisition of “The Huffington Post” adding it to a growing list

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By Salar Golestanian @ Tuesday, February 08, 2011 :: 12:52 AM :: 621 Views :: 0 Comments ::

The Huffington Post online newspaper was sold to AOL yesterday for $315m or £200m buyout. According to the BBC, the acquisition of the "intellectual centre-left website" will create an AOL media conglomerate with over 270 million users.

In her Huffington Post blog, founder Arianna Huffington revealed the deal was agreed over lunch with AOL Chairman Tim Armstrong, and called it a "merger of visions". She elaborated:

"By combining HuffPost with AOL's network of sites, thriving video initiative, local focus, and international reach, we know we'll be creating a company that can have an enormous impact, reaching a global audience on every imaginable platform."

AOL's decision to buy the Huffington Post is a bold gamble for a company that has had more than its share of setbacks in recent years. Not long ago, AOL once reigned supreme among internet service providers was left crawling from the wreckage of its merger with "old media" giant Time Warner in January 2000, a "transformative" deal that ended in divorce 10 years later. IT was dubbed as the worth deal of the century.

In 2008 Time warner bought Bebo for $850m and then sold it for $10m only two years later. Now AOL owns 3 of my favourite sites, Huffington Post, TechCrunch and Engadget. This is all done to bring in more of the online advertising revenue.

I am wondering if this purchase is trying to compete with traditional Media Empires like News Corporation trying to enter the Internet domain. AOL recognizes that the Huffington Post ranks as one of the top 10 current events and global news sites and draws 25 million U.S. visitors each month. It has built its popularity by compiling news from a wide selection of other media outlets, with links to articles and video on everything from politics to style to food. The site combines that type of aggregation with original work by its own small staff and blog posts from celebrity contributors who work for free in return for a platform to express their opinions. Bill Gates has written for Huffington Post, along with President Barack Obama, Robert Redford and several university presidents.

Here is a very helpful and poetic Next Media Animation that tries to explain things; From Tim Armstrong whilst AOL Shares today continue to plunge

It is estimated that the newly combined AOL Huffingtom Post venture will have 270million users with 117 million in US alone which would give it the edge it needs in the battle for advertising revenue.

AOL has been moving in this direction for years, and this acquisition seems to be the final gasps of a dying company that had lost its relevancy, Arianna Huffington is capable to help in turning the AOL business around. She founded Huffington Post only 6 years ago.