AOL yesterday announced it has bought fast-growing news source the Huffington Post in a deal worth $315m (£196m).
As part of the deal Arianna Huffington, co-founder and editor in chief of the US-based media outlet, will take charge of all of AOL’s editorial content.
AOL chief executive Tim Armstrong said the deal gives his firm “an ability to accelerate our core strategy, accelerate the advertising strategy, and put a different brand ability in content media space.”
AOL hopes to drive the site’s revenues from $31m last year to around $60m in 2011. Ian Maude, online analyst for Enders Analysis told City A.M. the deal fits AOL’s strategy of moving towards a low-cost, editorially driven content base but warned the price seems high.
He said: “AOL is obviously assuming it can grow its audience and advertising revenue but even then this deal seems pricey.
“Arianna is clearly a very important factor in the deal. Putting her in charge of editorial is placing a huge amount of faith in her.
“In short, it’s a successful, growing business that has attracted a lot of attention. It isn’t cheap but neither is it Armstrong’s Bebo moment.”
AOL suffered sharp declines in advertising sales and dial-up subscriptions in the fourth quarter of 2010, driving overall revenue down 26 per cent. to just $2.4bn.
The deal, which places a 10 times premium on the Huffington Post’s 2010 revenues, comes after a string of disastrous acquisitions by AOL.
Topping the list is its failed $350bn merger with Time Warner, which saw astronomical writedowns before AOL was spun off in 2009.
The firm was also badly stung when it bought Bebo for $850m in 2008, before offloading it just two years later to Criterion Capital Partners for a rumoured $10m.