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AOL buys online news hub Huffington Post

Headlines on AOL's Web site announced the purchase of the online news hub Huffington Post. The Post's co-founder and  media star,  Arianna  Huffington, was added to the AOL  management team.
Headlines on AOL's Web site announced the purchase of the online news hub Huffington Post. The Post's co-founder and media star, Arianna Huffington, was added to the AOL management team. AP

AOL, once the king of dial-up Internet, is stepping up its efforts in news and online advertising with a $315 million deal to buy news hub Huffington Post.

The acquisition announced Monday is among the most aggressive strategic moves engineered by AOL CEO Tim Armstrong in an effort to reshape a fallen Internet icon.

Perhaps just as important as picking up a news site that ranks as one of the top 10 current events and global news sites, AOL will be adding Huffington Post co-founder and media star Arianna Huffington to its management team.

After the acquisition closes later this year, Huffington will run AOL's growing array of content, which includes technology sites Engadget and TechCrunch, local news site Patch.com and online mapping service Mapquest.

The price AOL is paying is "really just the hiring fee to get Arianna," said technology analyst Rob Enderle. "This is one of those out-of-left-field moves that actually makes a lot of sense. This could put AOL back on the map."

Putting Huffington in a position of power also could threaten Armstrong's job security if AOL still struggles, Enderle said.

She co-founded the Huffington Post in 2005 and owns it with Kenneth Lerer and a group of other investors. They will get $300 million of the purchase price in cash.

The Huffington Post, which now draws 25 million monthly visitors, has built its popularity by bringing together news from a wide selection of other media outlets, linking to articles and video on everything from politics to style to food. It even has a new section on divorce.

It combines that type of aggregation with original work by its own small staff and blog posts from celebrity contributors who work for free in return for a platform to express their opinions. Robert Redford has written for the site, along with Bill Gates, Barack Obama and several university presidents.

Armstrong, a former Google executive, has been trying to turn AOL into a go-to place for a wide variety of news since he was hired to turn around the company in April 2009 while it was still part of Time Warner. The makeover is designed to give people a reason to visit AOL's Web sites more frequently to help boost ad sales.

During a conference call with analysts, AOL chief financial officer Arthur Minson said the company expects Huffington Post will generate $50 million in revenue this year, with a profit margin of 30 percent.

By comparison, AOL drew $2.42 billion in revenue last year. About 53 percent came from ads; most of the rest was from its dwindling base of dial-up Internet subscribers.

If it wins regulatory approval as expected, the deal probably would close in late March or early April.

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