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Why AOL acquired Huffington Post.

This morning AOL announced it is acquiring Huffington Post for 315 million dollars.  Here are 4 quotes that explain why this is a good thing for AOL.

AOL  CEO Tim Armstrong:
There are a number of areas where AOL and The Huffington Post’s content overlap and, based on our analysis, AOL lost roughly $20 million in those areas in 2010.” from Business Insider.

AOL CFO Arnold Minson: “The Huffington Post has had rapid growth since its birth. In 2011, we expect it will do over $50 million in revenue and we believe it will be at a $100 million revenue run- rate in the next 12 months and operating in the 30% margin range.” from Barrons.

As part of the transaction, Arianna Huffington, The Huffington Post’s co-founder and editor-in-chief, will be named president and editor-in-chief of The Huffington Post Media Group, which will include all Huffington Post and AOL content, including Engadget, TechCrunch, Moviefone, MapQuest, Black Voices, PopEater, AOL Music, AOL Latino, AutoBlog, Patch, StyleList, and more” From Kara Swisher’s blog.

Arianna says “I want to stay forever, I want this to be my last act” From Kara Swisher’s blog

So – Here’s why this works, in a nutshell:   AOL runs a business that has overlap with the business that Arianna Huffington runs.  Arianna ran her business, in 2010, with a $10m profit. AOL’s overlapping business produced a $20m loss. The new business unit will have Arianna’s name, she will  be the president, and she wants to stay… “forever.” 

Regardless of the traffic numbers, which are considerable, this is a huge win for AOL because they get a person who knows how to make money.  Given AOL’s master plan, this is exactly the business they want to make money in.

What do you think?

February 7th, 2011 Posted by | Business | no comments