So the Huffington Post took over AOL. Or, wait, did it go the other way? Yawn.
Newies have gotten all het up over the AOL/Huffington Post transaction. For anyone outside the media echo chamber, the Huffington Post is the lefty New Media publication created by Arianna Huffington. Early this month, AOL announced that it would acquire the HP for $315 million in cash. AOL is a shadow of its former self. Once the titan that would combine content and delivery, it failed to embrace the bandwidth revolution and is now primarily the owner of some popular blog sites.
AOL chief Tim Armstrong says that they are now poised to become one of the world’s chief content creators, rivaling the New York Times and CNBC. Arianna herself is now in charge of a large stable of online brands.
The problem is, the online news business stinks. There’s free content festooned with pop-ups that’s optimized to get the highest Google score, and there’s subscription content which provides highly-researched, specialized information. In between are the old-media giants like the Times or the Washington Post.
But that business model is struggling. Those companies have tried different payment schemes, and none has worked so far. The Wall Street Journal has always been subscription-based; Bloomberg subsidizes its news operation from its sophisticated investment application subscription. But when the Times tried to go with a subscription model, it was a disaster. Where will the Huffington Post go?
My guess is nowhere. It will lumber along on political junky news until after the next election, then fade away. Maybe that’s why Arianna took cash.
Douglas R. Tengdin, CFA
Chief Investment Officer
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