Since the first news alert hit my in-box on Monday morning I've been trying to decide how I feel about the acquisition of Huffington Post by AOL. I've come down squarely on undecided: there are at least two very clear, very different outcomes possible.
One justification for the deal (which reportedly cost AOL nearly half of its cash) is that it will create a whole lot more page views that AOL's sales team can then monetize. As I said in this space back in June, simply growing page views is a flawed strategy. Even though there's been much reporting of AOL's audience attrition with the evacuation of dial up customers, I don't believe that scale is what truly matters here. If AOL simply applies the same advertising-based monetization strategies to a new slice of inventory, then this ends up being a $350 million search optimization deal.
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On the other hand, Huffington Post is also valued for the strategy and style with which it aggregates content and generates outsized social media impact. Let's call this the "Arianna's got it figured out" scenario. If Tim Armstrong really hands her the keys -- and if she can get the car running -- AOL may become a lean, mean content machine, generating the content that the web ends up talking about, forwarding, rating, tweeting. If you believe "all media will be social" then you like this approach. In this scenario, AOL actually does "reinvent" journalism for the digital age (or at least begins deploying its replacement).
Tim may have used the first scenario to justify the deal to investors, but the second is the one that will not only save AOL but give it the chance to once again be a leader in marketing. But nothing in this deal will do any good at all if.....
- AOL's vision is limited to "advertising" revenue. No brand is lying awake because there are too few places to advertise. The future is about spawning marketing services, getting ever closer to brands and businesses. As it resets its editorial voice, AOL must also rebuild itself as a business platform.
- The dead-enders end up winning. Looking back across the history of M&A at AOL, you can't say this is a company that's been able to extract value from what it buys. Is Arianna Huffington the visionary that breaks the cycle? Or does she get swallowed up in the same black hole of bureaucracy and corporate inertia that's driven out so many before her?