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    The Huffington heist

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    [By Alistair Fairweather]

    Arianna Huffington must be smiling from ear to well-groomed ear right now. You would be too if you’d just suckered a struggling Internet giant into paying you US$315m for a site you started in 2005.

    The giant in question is AOL (formerly known as America Online), and in terms of Internet companies it’s as venerable as you get. As far back as 1989 AOL was connecting people to a primitive form of the Internet. That makes it a decade older than Google and four times Facebook’s age.

    Alas, age doesn’t necessarily bring wisdom. AOL has spent the last two decades trailing a distant fifth behind the likes of Yahoo, Google, Microsoft and, more recently, Facebook. Its connectivity business, once the envy of the industry, has been shrinking relentlessly for years leaving it desperate for a new business model.

    And it seems the model it’s chosen is the most cynical one on the Internet: content farming. Imagine an army of content producers, constantly scanning the Internet for the next hot topic and then quickly slapping together some information in a Frankensteinian parody of a useful article. Then, using clever manipulation, content farms ensure their stories appear near the top of the search results for said hot topic.

    That, in essence, is how Arianna Huffington’s site — the Huffington Post or HuffPo to fans — has grown into a 15m-visitor-a-month powerhouse. The front page of the site still reflects HuffPo’s lofty founding principles — excellent online journalism with a strongly political flavour — but the reality is that the bulk of its traffic comes from recycled stories about chimps biting people’s faces off.

    That doesn’t bother Tim Armstrong, CEO of AOL. In fact he has already enshrined this kind of “journalism” in a creepy document called “The AOL Way”. Previously a heavy hitter on Google’s advertising sales team, Armstrong understands how to monetise traffic better than most people. His strategy is clear: find sites that excel at attracting attention to themselves, via both search engines and social media, and acquire them.

    This is confirmed by AOL’s other high profile purchase of TechCrunch, a market leading technology blog, in September last year. Michael Arrington, TechCrunch’s founder and editor-upon-high, has made a name for himself as a Silicon Valley insider with strong (and usually inflammatory) opinions.

    That sounds a great deal like Arianna Huffington, except that she is a political insider rather than a technology guru. Once married to Michael Huffington, a former Republican congressman, Arianna jumped the fence and turned liberal after her divorce.

    This has made her a lightening rod for the likes of Fox News, which brands her as a traitor. Fox has accused her of all manner of ridiculous things, including hate speech, which only drives yet more readers to her site.

    And that’s just the kind of controversy that Tim Armstrong is courting, which is why Huffington has been appointed editor-in-chief of AOL’s clutch of content sites which includes other high profile blogs like Engadget and Moviefone. Armstrong clearly hopes to bait the rabid right into sending him yet more traffic to monetise.

    In essence this is a two-for-one deal for AOL — the gallons of traffic generated by HuffPo’s army of link baiters, and the cream of Arianna Huffington’s political and social influence. But the real question is whether that bundle is worth over R2bn.

    AOL has an extremely bad record when it comes to both mergers and acquisitions. Its disastrous marriage with Time Warner is now the stuff of legends, but the $850m it squandered on Bebo at the height of the social networking gold rush was arguably far more damaging. And it isn’t exactly flush with cash either. It’s been losing money for years.

    It’s likely that AOL has continued its long-running tradition of overpaying with the purchase of HuffPo, and relatively unlikely it will be able to return to its former glory on the back of retweeted cat videos and political bickering. Still, it’s going to try, and our search results are going to get a lot messier. Thanks a lot, Arianna.



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