America Online used to be among the largest Internet providers in the world, back in the days when you actually had to “log on” to the Internet through a dialup modem. Remember that beeping and hissing noise it used to make? Try describing it to the average teenager nowadays. It’s like Grandpa talking about butter churns. In the Information Age, it only takes a few years for hip youngsters to become cranky old farts, reminiscing about bygone eras.
AOL has been working to adjust its business model to content delivery, after years of multi-million dollar losses, adding up to what the New York Times describes as a “decade of decline.” Toward this end, they are purchasing the Huffington Post blog, and putting its founder Arianna Huffington in charge of “all of AOL’s editorial content,” along with “oversight not only of AOL’s national, local and financial news operations, but also of the company’s other media enterprises like MapQuest and Moviefone.” The deal is worth $300 million in cash, plus $15 million in stock.
Describing the value brought to this arrangement by the Huffington Post, the Times praises it for “creating an online community of readers with tens of millions of people. 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.” You couldn’t already do that on America Online? I wonder if the Huffington Post staff will also teach America Online how to embed videos and display advertising in the sidebars.
The Huffington Post acquisition is the kind of thing America Online needed to do, in order to reinvent itself as a media provider, although it’s a little odd to see such a big check written by a company that’s been bleeding money for years, and the Post’s impressive growth has still only left it with $50 to $60 million per year in advertising revenue and income. One advantage of the deal, along with many smaller acquisitions AOL has made lately, will be reducing the number of New Media outlets competing for those thin advertising dollars.
On the other hand, AOL is handing a lot of editorial control to a woman with no demonstrated ability beyond laying out honey traps for far-left hornets. Huffington is a loon, and while her core audience is certain to follow her over to America Online, her influence is likely to do more harm than good to AOL’s existing media products. The Huffington Post employs a lot of fire-breathers, whose ranting might prove repellent to the existing America Online audience – a group whose sedate nature is demonstrated by their continued willingness to patronize a Jurassic outfit like America Online. Granting editorial control to an extreme character like Huffington might ensure a loyal core audience, but it also means writing off every reader who prefers not to dwell in the extremes.
Remember, the Huffington Post is the outlet that tried to make a major scandal out of Sarah Palin bringing a “hairdresser” on a trip to Haiti, only to crumple in shame when commenters pointed out the “hairdresser” was in fact her daughter. Stuff like that happens over there all the time. For those who aren’t left-wing zombies, reading the Post is like watching a NASCAR race, in anticipation of a fiery crash.
In an insightful, and strongly disapproving, look at AOL’s latest acquisition, Dan Lyons of the Daily Beast notes that America Online’s content model is “all about making stories based on traffic potential and profit potential. It’s all about numbers – and volume.” He quotes an unnamed AOL employee describing the company in highly colorful terms, adding that working there “was the worst career move I’ve ever made.” Lyons compares the situation to galley slaves tugging at their oars under penalty of the lash. It looks like AOL just spent over $300 million to chain some more content producers to those oars. The intended result of this massive investment is AOL + Huffington Post = Massive Online Reader Supernova. The more likely result is AOL + Huffington Post = Huffington Post.