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AOL's acquisition of HuffPo: Tips for Patch?

As AOL completes its acquisition of HuffPo, perhaps Armstrong can take some pointers from Huffington

Financial trends and news by Faith Merino
March 7, 2011
Short URL: http://vator.tv/n/17d5

Sound the trumpets and release the doves: AOL has completed its $315 million acquisition of The Huffington Post as of Monday.  Let the layoffs begin!

The announcement of the merger was made last month at the Super Bowl, and the world is still reeling--especially disgruntled Huffington Post readers, who turned out en masse to eulogize their favorite progressive news source in the comments section. The terms of the deal included $300 million up front, in cash, and another $15 million in AOL stock. 

Bringing its own 25 million unique monthly users to the table, the Huffington Post is expected to bring AOL's total unique monthly user base to 117 million in the U.S. and 270 million worldwide. 

As AOL aims to reinvent itself as a content company to offset its ever-shrinking dial-up business, Arianna Huffington is stepping in as a welcome overlord to the company's mountain of recently acquired news sources, including Engadget, TechCrunch, and Patch. When Hugginton and AOL CEO Tim Armstrong sat down together at the Super Bowl to announce the deal, they described the merger not so much in business terms as language describing a match made on eHarmony.  Huffington told Kara Swisher of AllThingsD that she was stunned at how closely Armstrong’s vision for AOL paralleled her own vision for the Huffington Post.  Likewise, Tim Armstrong told Swisher that at a certain point, he and Huffington started finishing each other’s sentences (aw!). 

It kind of seems like AOL is casting a wide net these days, though. Last week the company announced that it's hyper-local news source, Patch.com, was acquiring a hyper-local news source of its own: Outside.in. Armstrong has claimed in the past that Patch will be the key to AOL's turnaround, and as the former CEO of Patch before becoming the head of AOL, I'm sure Armstrong believes this to be true, but he might take a few notes from Arianna Huffington.

For one thing, as a hyper-local news source, Patch has 800 different individual sites throughout the U.S.--each with its own editor and writing staff.  AOL hopes to expand Patch to 1,000 sites by the end of the year--which translates to a total of 1,000 editors and God knows how many writers.  How much will this cost AOL?  Somewhere around $120 million, according to Barclays analyst Douglas Anmuth. But this shouldn't be a problem, since Patch is drawing big numbers, right?  Nope.  The average post draws an average 100 views and the Patch network of sites altogether attract only three million unique monthly users--which is a pretty sad number but even sadder for the fact that it's an increase of 80% over last year. 

Compare Patch's three million unique monthly visitors to HuffPo's 25 million. And then add in the fact that the Huffington Post only employs approximately 100 editors, with only 200 paid employees altogether (although the site has gotten flak for building content off the backs of unpaid writers).  Tim Armstrong may have an interesting angle in trying to fill the void left by the demise of print media, but if the Huffington Post's success is any indicator, he's not going to see much profit by funneling oodles of money into a project that--by its very nature as a hyper-local news network--won't bring a big return. 

Image source: mediabistro.com


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