The Huffington Post/AOL Merger
AOL has also taken many guises, evolving from a computer game company to an Internet service provider to half of a media conglomerate and back to an Internet service provider. Now, after AOL’s $315 million acquisition of The Huffington Post last February, Huffington and AOL are hoping to fulfill what each other desperately wants—profits and plausibility for AOL, success and influence for Huffington. But can Huffington really run a news division? And can AOL really build its business on a blog? Here’s how the unlikely merger came to fruition—and where it might be headed.
An author dogged by multiple accusations of plagiarism, Arianna Huffington (née Stassinopoulos) emerges on the national scene during her husband’s California race for U.S. Senate. While Michael Huffington loses the election and close to $30 million of his oil fortune, Arianna gains fame as a conservative with a sense of humor, leading to a Comedy Central gig covering the 1996 presidential election.
Also in 1994, America Online, formerly a computer game biz called Control Video Corporation, reaches 1 million subscribers.
Following her husband’s failed Senate campaign and their subsequent divorce—after which Michael announces his bisexuality—Huffington launches two rudimentary websites, AriannaOnline.com and Resignation.com, which calls for Bill Clinton to step down. Meanwhile, AOL rides the ’90s tech bubble, purchasing Netscape for a stock swap valued at $4.2 billion and staking a claim as the world’s largest online service provider.
Huffington runs for California governor as an independent. Pitted against Republican Arnold Schwarzenegger, she positions herself as a Prius-driving progressive with the slogan, “The Hybrid versus the Hummer.” But a September revelation that the multimillionaire divorcée paid just $771 in taxes over the previous two years forces her out of the race.
Now a liberal, Huffington co-founds The Huffington Post with AOL Time Warner exec Kenneth Lerer and $1 million in capital. Part news aggregator, part celebrity blog, her site aims to become the Drudge Report’s progressive counterpart.
While HuffPo attempts to break ground, AOL tries to regain it. Five years after announcing AOL’s $184 billion purchase of Time Warner, AOL-TW’s stock price is plunging and AOL’s subscriber base is shrinking. In a December Washington Post op-ed, recently-resigned CEO Steve Case writes that the merger has failed.
In February 2008, HuffPo beats the Drudge Report for the first time, attracting 3.7 million unique visitors. But discontent among the site’s unpaid contributors is growing, and 15 paid employees have reportedly jumped ship since the site’s launch.
As HuffPo’s numbers rise, AOL-TW’s fall. After the company posts losses of over $16 billion in the fourth quarter of 2008, AOL-TW—whose stock has dropped over 80 percent since the merger—jettisons AOL in May 2009.
Looking to rebrand AOL as a content provider, new CEO Tim Armstrong purchases popular website Tech-Crunch for $25 million. Michael Arrington, who founded the blog in 2005, agrees to remain as co-editor for at least three years.
Saddled with a subscriber base consisting mostly of aging dialup users, Armstrong bets the ranch, buying HuffPo for $315 million, $18 million of which will reportedly go to Huffington herself. Armstrong names Huffington president and editor in chief of the new Huffington Post Media Group. Days later, AOL announces that it will lay off nearly 1,000 employees.
Rumored to be a volatile boss, Huffington loses three top editors in the month of May, but raids The New York Times to hire reporters and editors Maura Egan, Tim O’Brien, Peter Goodman and Tom Zeller. Egan quits by August. Reuters’ Felix Salmon writes, “People aren’t leaving because they can make more money elsewhere; they’re leaving because they hate the work they’re being asked to do”—i.e., rewriting other people’s reporting.
AOL-HuffPo loses its biggest name yet, TechCrunch’s Michael Arrington, after a fight over CrunchFund, a VC fund Arrington is starting with AOL’s support. But Huffington, claiming ethics concerns, pressures Arrington to resign but offers him a role as an unpaid blogger. Arrington announces his exit at a tech conference while wearing a t-shirt that reads “unpaid blogger.” The overall impression: chaos.
Huffington launches a new blog, Parentlode, and promptly receives a cease-and-desist letter from The New York Times citing the paper’s own Motherlode site. Meanwhile, a New York judge greenlights a lawsuit from two Democratic consultants who claim that Huffington stole the idea for HuffPo from them. A Huffington spokesman calls the lawsuit “laughable,” but the case moves toward trial or settlement—either of which could cost AOL yet more millions. Finally, quarterly data show that while HuffPo’s numbers remain strong, its spillover effect on other AOL sites is almost nonexistent.