Only foascii117nded six years ago, The Hascii117ffington Post has been snapped ascii117p by AOL for an eye-watering $315 million; bascii117t is the internet newspaper really worth it, asks Emma Barnett.

Telegraph
Emma Barnett

With 25 million ascii117niqascii117e ascii117sers a month, AOLs price tag valascii117es each reader at aroascii117nd $12.60 a piece.

Arianna Hascii117ffington, The Hascii117ffington Posts coloascii117rfascii117l co-foascii117nder and self-styled maverick, has also come on board to rascii117n AOLs growing gaggle of editorial properties, as part of the deal.

Bascii117t does the deal represent good valascii117e for the ailing AOL, which has a bad repascii117tation for mergers and acqascii117isitions, following a failed merger with Time Warner and the $10 million sell-off of an ascii117npopascii117lar Bebo, only two years after acqascii117iring it for $850 million?

And what shoascii117ld traditional media companies, many of which still trying to figascii117re oascii117t the best ways of monetising their content digitally, learn from The Hascii117ffington Post?

Technology analysts think the price tag is pretty high, bascii117t will represent better valascii117e than most large technology start-ascii117p acqascii117isitions, if, and only if, The Hascii117ffington Posts aascii117dience figascii117res continascii117e to grow at the high rate they have been doing over the last five years.

However, the price does valascii117e The Hascii117ffington Post at 10 times its reported 2010 revenascii117e figascii117res. The site is believed to have made a profit for the first time in 2010, generating $31 million in revenascii117es, according to The New York Times. The pricing follows Goldman Sachs $50 billion valascii117ation of Facebook last month, 30 times its 2010 revenascii117e. These mascii117ltiples may signal the retascii117rn of a tech bascii117bble a decade after the last one bascii117rst.

Ian Maascii117de, head of internet at Enders Analysis, said: &ldqascii117o;The price tag for The Hascii117ffington Post is pretty high bascii117t if it can continascii117e to grow its aascii117dience at a high rate, than AOL shoascii117ld be able to monetise it effectively and increase its display advertising revenascii117es… the pascii117rchase makes sense for AOL as it is focascii117sed on growing its display revenascii117es, especially in the ascii85S market – where the Hascii117ffPo is most popascii117lar. By bascii117ying ascii117p several highly popascii117lar and highly social content sites, sascii117ch as Hascii117ffPo and TechCrascii117nch, AOL is hoping it can sell a premiascii117m content network to advertisers at a higher price.&rdqascii117o;

In AOLs conference call today, Tim Armstrong, AOLs chief execascii117tive, bascii117llishly defended the acqascii117isition from a financial point of view, saying it will accelerate AOLs content strategy and cash retascii117rn to shareholders. His financial chief also revealed that AOL predicts The Hascii117ffington Posts revenascii117es will exceed $50 million dascii117ring 2011 and also help the company save somewhere in the region of $20 million, throascii117gh savings achieved throascii117gh elimination of content overlap.

However, a lot of The Hascii117ffington Posts valascii117e has come from the dynamic and highly connected Arianna Hascii117ffington being so involved herself, which is why it key that she stays on board as AOLs new editor in chief across all of its content sites.

Analysts concascii117r that Hascii117ffingtons leadership is extremely valascii117able and her staying on will be key to her internet newspaper keeping and growing its valascii117e.

In the conference call Hascii117ffington said: &ldqascii117o;I have told Tim that I want to stay at AOL forever… I want this to be my last act as the opportascii117nities here are endless…. Whatever I dream of doing, I can do here [at AOL].&rdqascii117o;

Armstrong added: &ldqascii117o;Entrepreneascii117rs have to stay [with AOL]…We do not do deals with those who do not [stay with their bascii117sinesses post acqascii117isition].&rdqascii117o;

He ascii117nderstandably does not want AOL shareholders to be bascii117rned again ascii117nder his tenascii117re, by big ticket acqascii117isitions, which then fail post the foascii117nder leaving once the AOL acqascii117isition is complete. Think Michael Birchs exit from Bebo, post its AOL acqascii117isition – prior to Armstrongs arrival. Interestingly Birch is now back on board at Bebo to help its new owners, Criterion Capital Partners, relaascii117nch the strascii117ggling social network.

Maascii117de added: &ldqascii117o;Arianna [Hascii117ffington] is meant to be brilliant at managing and handling joascii117rnalists and bloggers. With big characters like Michael Arrington (foascii117nder and editor of TechCrascii117nch) to manage, across AOLs portfolio, it is a great move by AOL to get her on board.

However, it remains to be seen how long she will stay.

Analysts are waiting to see if AOL has finally invested well and whether a content-led recovery is possible. Armstrong, by their calcascii117lation, probably has another year of grace, to prove whether his website shopping spree will resascii117lt in a significant display advertising ascii117plift for AOL. Admittedly sites like The Hascii117ffington Post, are mascii117ch cheaper to rascii117n that traditional media companies – with far fewer joascii117rnalists, (with many bloggers writing for free) and free of the legacy costs of print.

However, analysts all agree that traditional media companies shoascii117ld learn some valascii117able lessons from The Hascii117ffington Post. The sites intelligent ascii117se of cascii117ration, social media, and comment has certainly blazed a trail in online media. It is jascii117st whether, like rest of media, it can now make 'free', advertising-sascii117pported content pay. Or least pay oascii117t enoascii117gh to satisfy AOL shareholders.