After acquiring TechCrunch for a up till now undisclosed sum, the crippling internet behemoth AOL has added yet another big publishing player to its portfolio by buying one of the internet’s leading political and news portals, The Huffington Post.
The deal will be paid in cash, likely be completed late in the first quarter or early in the second, and its co-founder Arianna Huffington, 60 years of age, will remain at the helm of the company as president and editor-in-chief of the Huffington Post Media Group, which will include all Huffington Post and AOL content.
Tim Armstrong, AOL’s Chief Executive Officer, was in charge of this takeover, as well as for last year’s TechCrunch blog and 5Min Media, hinting towards AOL’s strategy of expanding across publishing platforms that promote original content and drive internet traffic, used then to monetize through advertising. Since it’s launch in 2005, the Huffington Post is now grossing around 25 million unique hits a month, providing to be very good add to their already huge demographics and audience which the AOL portfolio reaches. 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.
What’s peculiar is the ridiculous sum of the transaction, allegedly at $310 million, which to me seems a tad too much considering the portal’s revenue for last year was only $30 million and has been aiming to triple that to $100 million in 2012, a person familiar with the company’s plans said in December. Usually websites are priced at 1.5 of their yearly income, this deal was evaluated at x10 the amount. It’s understandable, sure, the Huffington Post’s influence is only growing, but how long can this growth be prolonged before the curve settles in horizontally? Maybe even a parabola even I be so daring….
The effect of the transaction on the stock market? 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. Wall Street doesn’t seem to be too keen on the transaction and like everybody else, nobody has faith in AOL anymore.
