Wall Street Journal
February 7, 2011
By NAT WORDEN
AOL Inc.'s $315 million acquisition of online news website Huffington Post boils down to a wager that free, ad-supported online news content can become a substantial profit driver for a large media company.
The Internet company, spun off from Time Warner Inc. in 2009, is now asking investors to look past its short-term financial suffering while it restructures and makes acquisitions, staking its future on becoming a digital content company and a one-stop shop for major brand advertisers looking to shift their spending online.
AOL's deal for Huffington Post puts Arianna Huffington, in charge of integrating the new media venture she founded with AOL's patchwork of sites, like the technology blogs TechCrunch and Engadget and the Patch local news sites.
Ms. Huffington, a prolific and outspoken political commentator, has also been a critic of the recent scramble by traditional publishers to find subscription business models.
News Corp. charges for full access to The Wall Street Journal and charges for its new tablet-computer newspaper, The Daily. New York Times Co., meanwhile, plans to begin experimenting with a pay wall for its flagship paper.
"Free content is not without problems, but it's here to stay, and publishers need to come to terms with that and figure out how to make it work for them," Huffington said in a speech at a journalism conference in late 2009 hosted by the Federal Trade Commission.
She clashed over her business approach at that event with News Corp. Chief Executive Rupert Murdoch, who is also an ideological rival to Ms. Huffington. Mr. Murdoch said the survival of high-quality journalism requires that consumers pay for news online and accused news aggregation sites, like Huffington Post, of acting like "parasites" by linking to and getting revenue from stories published by other outlets.
Ms. Huffington defended her site against that charge, noting that news aggregation is legal and that it drives large amounts of traffic to the sites of News Corp. and other publishers. She also said news aggregation is "part of the web's DNA."
Huffington Post had raised about $35 million in venture capital since its founding in 2005. It was expected to generate "north of $50 million" in revenue this year, up from $30 million in 2010. It also expects $10 million in operating income before depreciation and amortization this year.
By comparison, New York Times's news media group posted digital ad revenue of $212 million last year, and Comscore puts the December audience at its flagship site at 45 million unique visitors, compared with Huffington Post's 25 million. New York Times plans to launch an online subscription business soon that will give readers a free sampling of articles on its site before charging for access.
AOL is undergoing a major restructuring, and its fourth-quarter operating income more than doubled thanks to cost-cutting efforts, even as its revenue dropped by more than 25% and its ad revenue was down almost 30%.
Chief Financial Officer Arthur Minson said AOL could return to growth in operating income before depreciation and amortization by 2013.
"AOL is not a one year turnaround story, but we didn't come here for it to take five years," he said, adding that the Huffington Post would help speed the process.
Obviously from a consumer’s perspective having free news is a huge benefit. I think that because the internet has been such a huge part of my life especially as a student, it seems ridiculous to me to charge for articles when there is so much free content online. I regularly frequent AOL for news articles, and paying for the Wall Street Journal seemed so excessive, (although I will admit it is nice having it delivered to my door every morning). I think that soon all news content will have to rely on ads for revenue because with free news available, it will be hard to persuade consumers that their articles are worth the price.
No comments:
Post a Comment