Sizing up the AOL-Huff-Post deal

For AOL it's the chance to remain in the online content game; for Huffington and her investors, the $315-million sale price is a chance to cash out rather nicely (6.3 times estimated 2011 revenues is quite rich). AOL stock is down this morning, so Wall Street isn't all that impressed. Perhaps investors remember all the absurdly hyped deal stories that didn't work out all that well (News Corp's $580-million purchase of MySpace comes immediately to mind). Henry Blodget, who generally has good things to say about the Huff-Post deal, did point out a number of ways in which the merger might not work:

*AOL could blow the integration. Huffpo's sales head, Greg Coleman, has already announced that he's quitting, and AOL will have to mesh its sales force and Huffpo's without screwing up Huffpo's revenue or alienating one sales team or the other. Both sales forces call on the same accounts, so this will be no easy trick. The same can be said for technology and content integration, neither of which will be simple. (Which of AOL's "towns" will Arianna control? Will AOLers like working for her? Etc.)

*AOL could blow the overall content strategy. So now AOL has a major general news brand (Huffpo) and lots of smaller focused brands (Engadget, TechCrunch, Patch, etc). How will it integrate them? How will it staff them? How will it budget for them? How will it SELL them to advertisers? These are key questions that will matter to the folks who have to actually work for AOL and keep making great content going forward. They will be VERY easy to screw up.

*The key people could get bored and leave. Always a risk. It's even harder to imagine Mike Arrington sticking around for the rest of his three years, for example, now that he has been completely overshadowed by Arianna.

One more thing: Media scrutiny will be intense (it already is). Everyone will be waiting for Huffington to fall on her face because that's the way the world works these days. And make no mistake, Huffington and AOL CEO Tim Armstrong will fall on their faces in the beginning - it's inevitable.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
Mark Lacter, business writer and editor was 59
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