"It's going to be an equation of 1+1 equals 11," said Tim Armstrong, the chairman and chief executive of AOL, announcing the company's acquisition of The Huffington Post.
The Huffington Post, the ground-breaking online news and opinion site founded by Ariana Huffington on a shoestring budget, is, in fact, to be bought for $315m by AOL in a move sure to stun new media sceptics and believers alike, the Guardian reported.
As the New York Times reported, the two companies completed the sale on the evening of Sunday 6 Feburary and announced the deal just after midnight on Monday. Out of the $315 million, AOL will pay $300 million in cash and the rest in stock.
An AOL press release announced that the new group will have a combined base of 117 million unique visitors a month in the United States and 270 million around the world. It also states that Ariana Huffington, The Huffington Post's co-founder and editor-in-chief, will be named president and editor-in-chief of a newly created Huffington Post Media Group, which will integrated all content from both the news groups.
The Huffington Post began in 2005 with a small staff as a politics blog for Democrats. It now employs more than 200 people and reaches some 25 millions visitors every month. The company is privately owned by its two co-founders, Huffington and Kenneth Lerer, as well as investors. Though its private ownership means that it does not disclose its financial data, the New York Times reported Huffington Post executives estimates that the Web site will generate $60 million in revenue this year, compared with $31 million last year.
As NYT noted, one of The Huffington Post's strengths has been to create an online community of readers in the tens of millions. Their ability to leave comments on Huffington Post news articles and blog posts and to share them on Twitter and Facebook has been a major reason the site attracts so many readers. It is routine for articles to draw thousands of comments each and be cross-linked across multiple social networks.
For AOL, which untangled itself from a not so profitable merger with Time Warner in 2009, this deal could helps to revitalize itself after a decade-long decline, through an expansion in news gathering and original content creation. The millions of Huffington Post readers represent millions in potential advertising dollars, also noted the NYT article. AOL had started investing in creating content through projects like Patch as well as in technology coverage, acquiring the technology news blog TechCrunch last year.
Until now, the Jan 2000 merger between AOL and Time Warner was the largest merger in American business history. You can find an analysis of "how the AOL-Time Warner Merger went so wrong", here.
As NYT underlined, the deal carries a risk for The Huffington Post, which has had none of AOL's troubles and is widely viewed as a business success with its own unique voice and identity. Now that it is to become part of a large corporate entity, what becomes of that unique character is an open question.
On the other hand, "by handing so much control over to Ms. Huffington and making her a public face of the company, AOL, which has been seen as apolitical, risks losing its nonpartisan image. Ms. Huffington said her politics would have no bearing on how she ran the new business", the article reported.