AOL buys huffington post – maybe there is a plan?

Posted on February 8, 2011


so AOL has boldly stepped out and apparently overpaid for Huffington post. over 6 times Revenues (not profit). firstly, its a massive overpay and may make every content site owners eyes water as they imagine themselves being bought out for such dizzying values (which wont happen).

the acquisition is good for huff and AOL, it gives huff access to a much bigger and more powerfull sales team, which it needs to monetise its uniques properly. while huff generates around $50m in Revenues, this is nothing compare to NYT online, which has only 20% more uniques. the revenue differential however is massive. NYT generates 12 times that huffington posts digital revenues, with NYT getting$113m for the last qtr and roughly $600m for the year vs Huffington’s $50m for the year. this is quiet a revenue premium enjoyed by NYT for a small increase in traffic.

so, if AOL’s deeper pockets allow for a bigger sales force, the Huff could be worth more to them than the current owners as they can rapidly leverage up revenues.

the beauty of an online only content play is that its built with a much lower cost base than a newspaper. this means the additional revenues should come through on the bottom line less cost of sales.