02.13.11

Arianna Huffington's Quiet Partner

Amid all the publicity over the Huffington Post-AOL sale last week, few have focused on the PR wizard who played a stealth role in its success. Lloyd Grove on the enigmatic Ken Lerer.

Pay attention to the man behind the curtain—even if he doesn’t want you to.

Branding and media-relations wizard Kenneth Lerer barely has a public profile. This is by design: He likes to operate under the radar. His rather boring Wikipedia entry is only 237 words long. That’s an astounding achievement given that he has spent more than three decades at the white-hot center of corporate wheeling and dealing, playing pivotal roles, and making fortunes several times over, in the crisis PR business, the ultimately disastrous AOL-Time Warner merger—and now his latest coup, the jaw-dropping $315 million sale of The Huffington Post to AOL.

For the past six years Lerer, 58, has quietly nurtured HuffPo—along with his celebrity partner, Arianna Huffington—from a tiny collection of liberal blogs and news aggregation pages (an initially muted answer to the right-leaning Drudge Report) into an Internet powerhouse of such reach and influence that AOL Chief Executive Tim Armstrong sees HuffPo as the last best hope of his long-struggling company. (Full disclosure: Five years ago, Lerer and I discussed my working as a columnist and editor at HuffPo, but we couldn’t agree on salary; today, of course, I am kicking myself for not requesting equity instead.)

As HuffPo blossomed as a traffic magnet and brand name, the irrepressible Huffington, 60, provided creative energy, star power and virtuosic networking, initially wrangling such high-profile pals as Larry David, Nora Ephron, and Ari Emanuel to blog for free, and later expanding the website’s commitment to original journalism.

Lerer, its chairman, provided strategic vision and expert positioning in the trade press (where his relationships run deep and wide), and is credited with orchestrating sustained media focus on the notion that HuffPo’s market value would inevitably rise to the stratosphere, long before there was any reason to say so. According to industry insiders, he did much the same thing with America Online when he repped what was then the nation’s biggest Internet service in the late 1990s.

“Kenny’s strongest quality is the ability to see the nub of a problem very quickly, and to offer his advice unvarnished, but be appropriately polite and diplomatic,” says Walter Montgomery, Lerer’s former partner in the PR firm of Robinson Lerer Montgomery. “He’s not playing to the sympathies and biases of whoever’s listening to him. He’s sensitive to them, but he’s not playing to them.”

Lerer’s skill at strategic and tactical communication is hardly surprising; it was at the heart of his expertise when he launched the PR firm Robinson Lerer Lake along with Linda Robinson and James Lake in 1986. Montgomery joined shortly afterward, and the company was known as RLM after Lake left in the mid-1990s. Among Lerer’s blue-chip clients: MTV, Microsoft, NBC Television and junk-bond king Michael Milken.

“There’s never been any daylight between Arianna and me on strategy, or as partners or as friends,” Lerer told me.

The firm started with a huge advantage—the goodwill of Steve Ross, the larger-than-life chief executive of Warner-Amex, the parent company of MTV, Lerer’s first client. Ross had befriended Lerer when he was a young man toiling at Warner-Amex (one of the many precursors to Time Warner) in the early 1980s. Ross helped establish Lerer and his partners, gave them valuable access, and leased them prime office space at Warner-Amex headquarters in Rockefeller Center.

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John Sykes—who co-founded MTV with Tom Freston and Bob Pittman—recalls that Lerer “always had a keen awareness of how brands are built through the media, and how to use the media to nurture a brand along. He would tell us when we should go out and when we shouldn’t. He had a keen sense of timing when it came to positioning MTV, particularly as we were starting up new channels and dying to get in the papers, dying to get in the trades. Kenny knew when to hold us back.”

In 1996, Lerer landed AOL as a client, dropping Microsoft to do so, after his close friend Bob Pittman joined as a top executive and later became president and chief operating officer. At the time AOL was catching a lot of flak, and the ominous interest of various state attorneys general, when millions of users of its dialup service complained of constant busy signals that prevented them from getting online. “AOL had a crisis, and Kenny stepped into that and helped them manage through the crisis,” Montgomery recalls.

Lerer also worked his magic to help build perceptions around the AOL brand as the unstoppable multimedia monster that it once seemed to be. As an outside PR consultant, and then as AOL’s executive vice president for communications, Lerer orchestrated what one informed source calls “a drumbeat of announcements—expansions in Europe, advertising deals, all that stuff, and timed in such a way that there was a calendar-spaced set of announcements used to stoke the growing pace, to do deals and get warrants in other companies.” AOL’s stock price rose commensurately. “He was always orchestrating stuff,” this source says. “He was a master at creating friendly relationships with the media. He’s a charming guy, but the flip side is he can also be pretty tough.”

By the time Lerer was named AOL’s in-house communications czar in 2000, he was becoming a very rich man. He made a huge pile of cash—in the double-digit millions—on the sale of the privately held RLM to the Young & Rubicam conglomerate. An avowed loner and devoted husband and father who hates large meetings and avoids wearing ties, he found that he was increasingly miserable having to play corporate politics.

Lerer, by most accounts, was deeply skeptical of the 2001 AOL-Time Warner merger—which ultimately vaporized more than $125 billion in stockholder equity and is still considered one of the worst catastrophes in the history of American business. While doing the job of selling the arranged marriage to the outside world, Lerer argued internally—and prophetically—that the cultures of the two companies were wildly incompatible, and that the vaunted synergies of combining forces would never occur. Lerer knew many of the Time Warner execs from his days under Steve Ross at Warner-Amex. If AOL’s Steve Case, the CEO of the new company, believed that he could run roughshod over Time Warner’s clueless, toothless, old-media dinosaurs, Lerer warned, according to an insider: “You don’t know these guys. These guys will chew you up and spit you out.”

That, eventually, is what happened. After working closely with Time Warner’s Gerald Levin and then Dick Parsons, who ended up taking over the traumatized company after Case stepped down, and saving what looked like a sinking ship, Lerer left AOL-TW in 2002. Unlike many senior executives who held on to their stock, Lerer sold expeditiously at the top of the market, and made an estimated $30 million.

It was, after RLM, his second big score.

For the first time in his life, Lerer didn’t have a job. He and his wife of three decades, Katherine Sailer, hosted fundraisers and book parties at their spacious apartment overlooking Central Park. He involved himself in philanthropy, becoming the chairman of Joseph Papp’s Public Theater, where he twice steered the ailing theater out of its financial problems. He honed his tennis game and later took ping pong lessons. He skied in Park City, Utah, where he’d acquired a vacation home. He invested in boutique hotelier Andres Balazs’ growing business empire. And Lerer indulged a passion for left-leaning causes and politics that he has nursed at least since 1974, when Victor Navasky, later editor of the Nation magazine, hired the 21-year-old Brooklyn-born college dropout to be the deputy campaign manager of Ramsey Clark’s quixotic Senate race against a popular incumbent Republican, Jacob Javits. “I could tell that Kenny was someone special,” Navasky says today.

In 2003, with the encouragement of his friend Norman Lear, Lerer launched a pro-gun control website, www.StoptheNRA.com, with the goal of extending the Clinton-era federal assault-weapons ban, which gave him his first hands-on experience with Internet entrepreneurship and allowed him to steep himself in the gritty details of online technology and presentation. Even though the Republican-controlled Congress allowed the ban to expire, Lerer tells friends that of all of his accomplishments, including The Huffington Post, he’s proudest of StoptheNRA.com, today the website of the Brady Campaign. Lerer donated the site to the gun-control advocacy group in 2004.

Despite their many mutual friends, Lerer and Huffington didn’t meet until one night in 2003, when Kathy and Tom Freston, then-head of Viacom, invited them to dinner at an Italian restaurant on Manhattan’s Upper East Side. Huffington—who’d been developing her own opinion site, AriannaOnline.com, while Lerer had been working on StoptheNRA.com—charmed his socks off. And so began a series of discussions that resulted in the launch of HuffPo in May 2005. They started with seed money of slighty more than $1 million—later increased to around $37 million by individual investors and venture capital funds. Media venture capitalist Alan Patricof, of the Greycroft fund, says he earned six times his investment from the AOL deal. "I wish I'd put in more," he laments, declining to say how much he did invest.

While Lerer recruited talent from his New York headquarters, providing HuffPo with a newsroom in a vintage building in Soho, Huffington presided from her home in Brentwood, California, relentlessly wrangling high-profile contributors (I personally saw her buttonhole George Clooney and Supreme Court Justice Stephen Breyer at different parties) and publicizing the HuffPo brand through her frequent television and radio appearances.

For the first two years, Lerer was deeply involved in the day-to-day operations of HuffPo, not only developing the site’s technology but also its liberal political leanings, re-writing headlines for maximum impact and traffic, and constantly kibitzing with his young editors on story selection and presentation. He was known among the twentysomething staffers as a benevolent slave-driver, expecting 12-hour workdays, seven days a week, but often staying in the newsroom himself past midnight to tweak headlines, photos, and video, while calling in his directions as many as 20 times a day. According to several HuffPo staffers, Lerer withdrew from active management of the site in 2007 after clashing privately with Huffington on its editorial direction. According to my informants, she wanted to expand rapidly into more and more sections; he preferred slower, more deliberative growth. She got her way.

Lerer, who otherwise declined to be quoted for this story, went on the record with me only twice: to knock down rumors of increasing tension between himself and Huffington about business strategy over the past few years, and to rebut a widespread supposition that it was he, not Huffington, who negotiated the rich deal with AOL’s Armstrong.

“There’s never been any daylight between Arianna and me on strategy, or as partners or as friends,” Lerer told me. “Arianna deserves the credit. I haven’t been involved, except as chairman, for three-plus years.” Lerer added: “Arianna was the main architect and the driving force behind the deal with AOL. Anybody who told you otherwise doesn’t know what they’re talking about.” Huffington, at Lerer’s request, declined to comment for this story.

Many see Lerer’s deft touch with the media in the consistently upward trajectory of published estimates of HuffPo’s worth in various outlets over the past few years—from $60 million in a September 2007 post by Business Insider’s influential editor Henry Blodget to, most notably, the eye-popping (and eerily on-the-mark) valuations of $300 million-$450 million in a Dec. 14 Bloomberg News story and $350 million in a Vanity Fair piece that hit the newsstands in early January, just as the secret AOL talks were heating up. Lerer privately disclaims credit for all the helpful media speculation.

In the past few days, Lerer has been recoiling from the hype normally accorded a Powerball winner as he prepares to pocket tens of millions of dollars from the AOL transaction—as much as an estimated $50 million, as HuffPo’s second-largest stockholder (after Oak Investment Partners’ Fred Harman, a member of the four-person HuffPost board). Lerer plans to resign from HuffPo to concentrate on Lerer Ventures, his new private Internet investment with his son Benjamin and, most likely, departing HuffPo Chief Executive Eric Hippeau.

Huffington—who, unlike Lerer, will continue to lead HuffPo and set up shop at AOL’s Manhattan headquarters as head of content for the entire company—stands to profit by around $18 million from the deal, according to published estimates. Founding editor Roy Sekoff, food editor Colin Sterling, and former news editor Katharine Zaleski, among others, will become instant millionaires, and Chairman Lerer and Editor in Chief Huffington have promised their 200-odd employees that they will all participate financially in the AOL windfall.

“I’m so happy for Dad,” says Lerer’s 29-year-old son Ben, founder of the highly successful male consumer-oriented Thrillist.com. “The process of getting a deal like this is rough,” Ben Lerer says, “and we’re glad that it’s finally done. It’s exciting to have him at Lerer Ventures, and we’ll have more fun with it when he’s here full time.”

Expect another big score with Thrillist three years from now.

Lloyd Grove is editor at large for The Daily Beast. He is also a frequent contributor to New York magazine and was a contributing editor for Condé Nast Portfolio. He wrote a gossip column for the New York Daily News from 2003 to 2006. Prior to that, he wrote the Reliable Source column for the Washington Post, where he spent 23 years covering politics, the media, and other subjects.