The big news in the online media world today is that AOL plans to swallow the Huffington Post for $315 million and hand over control of its entire editorial and content operations to founder Arianna Huffington. Although Om is skeptical of this deal for some very good reasons, I think it makes a lot of sense for both sides— growth has been slowing at Huffington Post, and they would likely not really be able to boost the size and scale of the site without a lot more investment. AOL, meanwhile, needs someone to take charge of its content strategy, which has been all over the map and has yet to produce substantial returns.
With this deal, the HuffPo's founders get a nice return on their investment, and AOL gets an identifiable brand in Arianna Huffington, as well as someone who understands how content works online now. From a content point of view, the Huffington Post is doing exactly what AOL does—or wants to do—but even better, because most of its content is completely free. Its biggest strength is as a smart aggregator, not a content creator, and that's what AOL needs help with (whether people will want to create content for nothing when they're working for AOL instead of Arianna is another question).
Among other things, HuffPo has shown that it really understands how readers discover and engage with content online: It was one of the first to implement Facebook Connect in an aggressive way, and that helped to drive phenomenal amounts of traffic to the site, as well as millions of comments. Every one of those comments (which are all moderated by hand, in what is likely one of the company's biggest editorial investments) is a vote for a story and for the site, and so are all the "likes" and sharing that readers do through Facebook, Twitter, and other networks.
To take just one recent example, a December blog post about Sarah Palin was read by more than 700,000 people, was shared by readers more than 24,000 times on either Facebook or Twitter, and generated more than 7,500 comments.
The biggest issue is whether Arianna can somehow make sense of AOL's vast—and somewhat confused—content strategy. There are old bits of the previous portal business still lying around, many of which have been duct-taped to newer ones, such as TechCrunch in "towns" based around content themes, but it's unclear whether that is really going to work, especially with advertising revenue continuing to fall.Then there's the $75-million-plus that Tim Armstrong has spent on the Patch.com project, a "boil the ocean" attempt at hyper-local, and a Demand Media-style effort called Seed that AOL is hoping can produce enough content to generate substantial revenue.
The two areas where Arianna and her team can make the biggest difference with are Seed and figuring out the content "towns" strategy. It's obvious that AOL has been trying to work out which topic segments are worth investing time and money in and which should just be outsourced—after spending millions to hire expensive talent for its sports content unit FanHouse, for example, the company recently laid off most of the staff and licensed the entire thing to competitor Sporting News. Buying HuffPo and such sites as TechCrunch makes it obvious AOL has decided that tech and politics are going to be core businesses on the custom content side.
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