Huffington Post Blog bought for US$315 Million

By Brett Pulley and Young-Sam Cho - Feb 8, 2011 12:03 AM GMT+0800

Tim Armstrong, chief executive officer of AOL Inc., and Arianna Huffington, co-founder of the Huffington Post. Photographer: Jin Lee/Bloomberg

Feb. 7 (Bloomberg) -- AOL Inc. agreed to buy the Huffington Post for $315 million as the Internet company spun off from Time Warner Inc. increases its investments in online content to help revive growth in advertising revenue. Bloomberg's Jon Erlichman reports. (Source: Bloomberg)

The homepage of the Huffington Post on Monday. Photographer: Andrew Harrer/Bloomberg

Huffington Post co-founder Arianna Huffington will be named president and editor-in-chief of the Huffington Post Media Group, according to the statement. Photographer: Andrew Harrer/Bloomberg

AOL Inc. agreed to buy the Huffington Post for $315 million as the Internet company spun off from Time Warner Inc. increases its investments in online content to help revive growth in advertising revenue.
The offer includes about $300 million in cash and the deal will likely be completed late in the first quarter or early in the second, New York-based AOL said in a statement today. Co- founder Arianna Huffington, 60, will become president and editor-in-chief of the Huffington Post Media Group, which will include all Huffington Post and AOL content.
AOL, led by Chief Executive Officer Tim Armstrong, acquired the TechCrunch blog and 5Min Media last year, investing in specialized websites and production of original video content to generate Internet traffic and attract advertising revenue. The number of unique visitors at closely held Huffington Post, which aggregates articles and publishes its own content, has grown to about 25 million a month since its debut in 2005.
“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 MediaMorph Inc., a New York-based digital media-tracking service, said in an interview. “HuffPost gives AOL a very compelling, affluent, educated young audience. It further strengthens AOL’s overall editorial abilities with Arianna in charge.”
AOL declined 5 cents to $21.89 at 10:52 a.m. in New York Stock Exchange composite trading, after falling as much as 4 percent. The shares had declined 7.5 percent this year before today.
Huffington + TechCrunch
AOL is struggling with declining revenue in both its advertising and Internet-access subscription businesses. The company this month reported fourth-quarter revenue fell 26 percent to $596 million, with advertising sales dropping 29 percent to $331.6 million.
Huffington Post had revenue of about $30 million last year and has been aiming to triple that to $100 million in 2012, a person familiar with the company’s plans said in December. The company posted its first annual profit in 2010, Huffington, a Greek-born, Cambridge-educated author and political commentator, said in a conference call to announce the deal to investors.
The combination will create a group with about 270 million unique visitors a month worldwide and 117 million in the U.S., according to the statement. Huffington Post material will be integrated with AOL content, including Engadget, TechCrunch, Moviefone and MapQuest, according to the statement.
“Huffington Post brings another level of ability for us to serve brand marketers,” said Armstrong on the conference call. He said marketers contacted in recent hours are “very interested in this combination.”
Equity in AOL
The $300 million in cash will be divided among the Huffington Post’s owners, which included Huffington and her co- founder, New York-based angel investor Ken Lerer, and venture capital investors. Employees of Huffington Post will receive $15 million in AOL stock in exchange for their unvested Huffington Post options, AOL Chief Financial Officer Arthur Minson said on the call.
Huffington Post had raised about $35 million in venture capital from firms including Greycroft Partners LLC, founded by Alan Patricof. Most of the last round of $25 million, led by Oak Investment Partners, remained in the bank in December, Huffington said in an interview at that time.
She said she and Lerer together raised an initial $2 million to start the company. The company declined to say how much of its equity is controlled by Huffington.
‘Moved Quickly’
The purchase price is above the historical average for similar deals. Web portals, such as the Huffington Post and companies like social networking site Facebook Inc., have been valued at about 1.5 times their revenue, according to the median of a dozen deals tracked by Bloomberg in the past two years.
AOL’s Armstrong requested a meeting with Arianna Huffington this year and made the offer to buy the website at a lunch at her place, according to a blog posting by Huffington today.
“Things moved quickly” and the deal was signed at the Super Bowl at the Cowboys Stadium in Arlington, Texas, yesterday, she said.
The Huffington Post site has benefited as newspapers and magazines lose readers and advertisers to the more interactive experience of Web services. While the site’s number of visitors trail behind those of the New York Times, it exceeds those of online-based rivals such as the Daily Beast and the Drudge Report, according to estimates at ComScore Inc.
The site has boosted traffic by encouraging readers to weigh in on stories and contribute their own views.
“People don’t want just to consume news,” Huffington said in an interview at her New York City headquarters in December. “They want to share it, they want to advance it, and add to it.”