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02.07.11

AOL Buys The Huffington Post: Opinions on the Deal

Remember when AOL used to send you internet access on a CD? Those days are long over: The company purchased The Huffington Post for $315 million as part of its makeover as a media company. Here’s the rundown of the deal.

When AOL CEO Tim Armstrong talked to The New Yorker last month about his plans to transform the former Web giant into a media company, he wasn’t kidding: AOL has purchased The Huffington Post for $315 million—AOL’s largest acquisition since it spun off from Time Warner in 2009.

Arianna Huffington, who launched The Huffington Post in 2005 with $1 million in investment, will now control all of AOL’s editorial content as the president and editor in chief of the newly formed Huffington Post Media Group, according to The New York Times. That means she’ll be overseeing popular blogs like Techcrunch, local-news initiative Patch, and also websites like MapQuest and MovieFone. AOL’s news websites, like Politics Daily and Daily Finance, will probably disappear when the deal closes sometime in the first half of 2011. Some of those websites’ writers will join the staff of The Huffington Post.

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Talks began between Armstrong and Huffington as recently as November at the Quadrangle Conference, and Armstrong made his official offer at Davos in January, according to All Things Digital. The $315 million offer was, apparently, too good for The Huffington Post investors to refuse—it’s five times the $60 million in revenue the website is expected to haul in this year.

“I think this is going to be a situation where 1 plus 1 equals 11,” Armstrong tells The New York Times—a statement that earned the scrutiny of AOL co-founder and former chairman Steve Case, who tweeted, “AOL to Buy Huffington Post; Tim Armstrong says "1 + 1 will equal 11" ( NYTimes) Really? That wasn't my experience.”

Not everyone’s as skeptical. “My feeling, then, is that this deal is a good one for both sides,” writes Reuters' Felix Salmon. “AOL gets something it desperately needs: a voice and a clear editorial vision.” And what about HuffPo? “It gets lots of money, great tech content from Engadget and TechCrunch, hugely valuable video-production abilities, a local infrastructure in Patch, lots of money, a public stock-market listing with which to make fill-in acquisitions and incentivize employees with options, a massive leg up in terms of reaching the older and more conservative Web 1.0 audience and did I mention the lots of money?”