AOL shocked the media and blogosphere on Monday with their announcement that they were buying the liberal Huffington Post. Apparently, they weren’t the only company hoping to buy the popular site. Bill Kirtz, writing for Poynter.org, reports that former NBC Universal president and chief executive Jeff Zucker told an audience at Harvard’s Shorenstein Center that NBC had spent 18 months pursuing a deal but “could never agree on price.” Zucker also praised the deal by saying that it was “a very good day if you believe in news. It helps The Huffington Post monetize its investment and gives AOL a bigger platform.” With all the lefties on MSNBC, it would have been a marriage made in heaven; but NBC wasn’t so in love with the idea that they would pay just any price.
It was a very good day for Arianna Huffingtona and her investors, but not for AOL shareholders who have seen the market cap of the company drop by the value of the purchase price since the deal was announced. Porter Bibb, managing partner at Mediatech Capital Partners LLC, commenting on Bloomberg Businessweek.com wondered where AOL with a price of 30 times projected earnings, could afford paying for 95% of it in cash. Bibb called this the internet bubble 2.0. Huffington didn’t just monetize her investment, she robbed AOL blind.
According to AOL Chief Finance Officer Arthur Minson, HuffPo will generate $50 million in revenue this year, with a profit margin of 30 percent. Simple math says that equals $15 million. They just paid $315 million. It looks like a long payoff. Conservatives have been critical of AOL from an ideological perspective as the purchase gives Huffington a bigger platform for her views, but liberals are worried that she has sold out. Conservatives could possibly benefit as the value of The Daily Caller or the myriad Andrew Breitbart sites just soared and made them potential acquisition targets. Liberal bias and all, Arianna is laughing all the way to the bank.