AOL-Huffington Post: Why the Heavy Breathing?

It’s day two of the $315 million AOL-Huffington Post deal and the non-news just keeps on coming. On the same day that there was $16 billion in M&A, we’re still talking about a tiny deal for advertising inventory. Tim Armstrong’s deal isn’t really the issue.

The most important takeaway from the deal is the limited valuation. No one, not HuffPo’s venture money or AOL or anyone else in the internet business, sees advertising as a business with growing margins. The valuation on Huffington Post is low because of the insistence on cash and the dark prospects for advertising in a world driven more by Groupon than by simple display ads.

Ok. Fine. Pretty boring business stuff that belongs in a couple of inside stories on the advertising and media industry. Instead we get a fixation on Arianna Huffington and willful mis-reading of her figurehead role at AOL. Take a look at the Washington Post story on the deal:

Always-charming, ever-clever Arianna Huffington became something else in the late hours after the Super Bowl on Sunday: a shrewd and unimaginably successful businesswoman. […] Rough estimate of Huffington’s personal cut of the deal: $100 million, virtually all of it in cash, according to Wall Street analyst Laura Martin.

Really? Unimaginably successful for making $100 million in a world where a 20-something kid is worth several billion? Journalists have such meager imaginations, I guess. There are a bunch of self-made billionaires who are women who were able to imagine more than that (Oprah, J.K. Rowling, Meg Whitman)–and dozens more women who are not billionaires.

More to the point, that $100 million makes no sense. The cash deal was driven by Softbank. Arianna said on CNBC that she took 25% in stock. She suggested others did too. Even if she took all of the stock, that would max her take at $60 million.

There’s been speculation that with so much money in her pocket, Huffiington would be eager to leave. But that view requires a suspension of any knowledge of Huffington’s career and personality. She’s no editor and certainly not a manager. Her goal in starting the Huffington Post was to build a platform for herself.

That has worked out beautifully. Huffington regularly appears on all the shows and a the big conferences (the formal offer was made at Davos, enough said.) To appease her vanity, Armstrong had to give her the titular role as Editorial Director or the whole company. With her speaking schedule and need to be in on “the conversation,” AOL’s other properties don’t have to worry about Arianna’s meddling.

Viewed from the perspective of Huffington’s own ambitions to be a meaningful public figure, the Huffington Post has succeeded far beyond what anyone (especially Tina Brown) thought Huffington could achieve. Though I’m sure it has fallen short of Arianna’s own imagination. Here’s a woman who saw that the right was over-crowded with leggy firebrands and pulled off a careerist conversion to rebrand herself as a leftist.

As an editor, however, no one can point to the writer she’s discovered and championed. Indeed, there’s no success that comes out of the Huffington Post in pure content terms. Here’s Jack Shafer on Huffington’s relevance as a journalist:

How to account for Huffington’s remarkable success? If you’ve ever edited Huffington’s raw copy (I have) or read a galley of one of her books before the published version comes out (which I’ve also done), you know that she’s not much of a journalist. But instead of impeding her, those limitations actually gave Huffington an advantage over other sites—Slate included—that hewed to old-media standards. Old-media types don’t feel right about rewriting the copy of their competitors and calling it a story. Huffington glories in carving the meat out of a competitor’s story, throwing a search-engine optimized (SEO) headline on it, and posting it. She even claims to believe that she’s doing the originator a favor by sending traffic back to it via a crediting link.

So Huffington’s relevance to journalism is nil. It’s all SEO page views. And there’s a reason that the New York Times, which has fewer uniques than the Huffington Post according to many of the press accounts, is worth a lot more than $315 million even in its hobbled financial state today.