The $315 million AOL-Huffington Post deal follows about half a dozen others, including Newsweek-Daily Beast and AOL-TechCrunch deals, in 2010. All of them indicate two happy things. One, mainstream media’s hopes from the Internet are still alive. Newsweek’s owner Sidney Harman bought the beleaguered magazine for a token $1 from The Washington Post Co. He reckons that being in a 50:50 joint venture with Tina Brown’s Daily Beast, a popular news site, will revive its fortunes. Two, Internet firms continue their struggle to master professionally generated content. AOL has been working hard to become a one-stop online shop for specialised content. So, while Huffington Post is about news, TechCrunch is a specialised new media site. These are among the 13 acquisitions that AOL has made in 2009 and 2010 under CEO Tim Armstrong.
Think about it. It is no coincidence that Tina Brown was the editor of New Yorker magazine, acknowledged globally as an excellent read. She understands what journalism and good writing is about and that is why The Daily Beast is a success. Nor is it a coincidence that Mr Armstrong who took over as CEO of AOL in 2009 is an ex-Google man. He knows that ultimately being an aggregator can get you only so far. To hit the really big time on audiences, revenues and profits, the Internet’s ability to get audiences has to be married with old media’s ability to keep them there and charge a premium for it. For very long, Internet companies sneered as newspaper publishers felt the heat of dwindling audiences. But what has been evident over the last decade is that while people leave newspapers or watch less TV news, they do not necessarily spend the same quality and quantity of time on news online. They skim, surf and consume it in bits, bytes and hyperlinks. So, they are loathe to pay for or subscribe to online news options.
The stickiness for which advertisers pay a premium to newspapers, magazines or cable stations, is something that the Net as media lacks. The only time there is stickiness is when there is professionally generated content on offer. So, while aggregators such as Google are the doorway through which millions of users enter, what they eventually settle down to is a good, old-fashioned read. Of the top 20 news sites in the US, 17 come from old media companies. But while the same reader gets 14 times as much in ad rates offline, online he becomes less precious. So, both Internet companies’ ability to get them and old media’s ability to keep them there need to be combined if the industry wants to make money.
The AOL-Huffington Post deal and others are part of the fumbling for the right business model. It means that the trial and error that could lead to large-scale profits for online news media, a la newspapers and TV stations, continues. How many dotcom bubbles later will the marriage of professionally generated content and online media happen is a billion dollar question.