Cheapskate Huffington Post in Limbo at Verizon

[Deam]

Over the last couple of years, an array of media companies,
venture capitalists and wealthy individuals have quietly
explored buying a stake in The Huffington Post. The most recent
valuation, according to half a dozen people briefed on the
matter: about $1 billion.

Those interested have included the European media companies Le
Monde and Axel Springer; the Napster founder Sean Parker; and
the private equity firm General Atlantic, those people said,
speaking on condition of anonymity. Some of the talks were
navigated by AOL, The Huffington Post’s parent company, as it
sought ways to raise money, others by the site’s well-connected
founder, Arianna Huffington.

But when the music stopped last month and Verizon’s $4.4 billion
takeover of AOL was announced, The Huffington Post was still
owned by AOL — creating an unlikely corporate home for one of
the nation’s leading liberal news outlets.

Verizon executives have said that the primary reason for the
purchase was AOL’s advertising technology, so it is not
completely clear what it might want with The Huffington Post,
and how a relationship between them might work. It also is
unclear whether the famously independent Ms. Huffington will be
comfortable operating within Verizon. Her contract expired this
year, and she has yet to sign a new one, which raises the
prospect of a Huffington Post without a Huffington.

In a memo she sent to the site’s leadership last week, she
outlined ambitious plans. The Huffington Post will try to grow
globally and expand its video operation, she said, and add to
its network of unpaid bloggers, replace wire service articles
with original reporting and increase comedy and lifestyle
offerings. It might even make acquisitions of its own, according
to a copy of the memo obtained by The New York Times. But Ms.
Huffington has told friends, according to a person with
knowledge of the conversations, that she is not yet sure that
those plans can be executed under Verizon.

The quandary has left the site in a kind of limbo as each side
prepares for the close of the deal, expected next month. AOL and
Verizon executives, including the Verizon chief executive,
Lowell C. McAdam, were meeting this week to discuss a range of
issues, the future of The Huffington Post among them.

The sale comes at a pivotal moment for The Huffington Post,
which AOL acquired in 2011 for $315 million. The site was
founded 10 years ago, and built its growth on relentless
aggregation and search engine optimization. (It remains the top
result for the query “what time is the Super Bowl?” for
example.) In 2010 and 2011, it hired several well-regarded
journalists and sought to expand its news output. In 2012, it
won a Pulitzer Prize for national reporting.

Some of its most lauded journalists have left, however, as
reports swirl about a demoralized newsroom and mercurial demands
from Ms. Huffington, who also pursued sideline interests in
wellness and workplace culture. It has recently sought to
bolster its reporting again, by starting a venue for deeper
stories and vowing to replace wire service articles with
original journalism.

“It does raise that larger question,” the media analyst Ken
Doctor said. “When you have major journalistic outfits owned by
companies that do not have a journalistic legacy, what happens
when intense pressures occur?” At the BBC or The Guardian, he
said, “you know the legacy is there; you know that there is
going to be such pushback that editorial integrity will be
maintained.” That is not so clear with new players like Verizon,
he said.

The Huffington Post sits at the center of a phenomenon that some
describe as the birth of a new media establishment: Several
digital start-ups, including BuzzFeed and Vice, are trying to
upend news presentation the way cable channels encroached on
broadcast television in the 1980s. By that measure, some in the
industry say, $1 billion is a reasonable valuation for a site
with more than 200 million unique visitors a month, and
acquiring it is a smart play for Verizon as it follows other
communications companies, like Comcast, in owning its own
content.

Others see, instead, a frothy market that has led to overly high
valuations for media companies, based largely on branding and a
relentless focus on audience development techniques.

According to a document published in 2013 by the website The
Smoking Gun, The Huffington Post was expected to generate $60
million in revenue in 2011, when AOL bought it, with $10 million
in Ebitda (earnings before interest, tax, depreciation and
amortization) growing to $165 million in revenue and $58 million
in Ebitda by 2013. People with knowledge of its current finances
said that its annual revenue is now in the hundreds of millions,
and that its profitability depends on how generously its recent
investments in a global expansion and video are assessed.

Current and former Huffington Post staff members, who insisted
on anonymity, greeted the news of the sale with a blend of
bemusement, dismay and idealism. One said that it was difficult
to imagine what kind of owner Verizon might be. Others wondered
whether contradictory cultures at the two companies could mesh,
and whether Verizon could make good on the promises, including
editorial independence, and further investment, that it made
privately since securing AOL.

The inherent tensions are not hard to discern. Verizon skews
conservative. The Huffington Post is one of America’s best-known
liberal voices. Verizon is against net neutrality, the notion
that broadband service providers should treat all data equally.
The Huffington Post is for it. Verizon has cooperated with
government court orders to hand over telephone records. The
Huffington Post has campaigned against National Security Agency
mass data collection programs.

Verizon executives have been at pains to reassure The Huffington
Post that it will have editorial independence. But late last
year it closed its own venture into creating content, a
technology site called SugarString, not long after the Daily Dot
reported that an editor there had warned reporters that they
would not be allowed to report on “spying or net neutrality.”

The Huffington Post and Ms. Huffington declined to comment for
this article. Verizon declined to make any of its executives
available, but pointed to public comments that its chief
financial officer, Francis J. Shammo, made at a conference
shortly after the deal was announced.

The company bought AOL, he said, primarily for its advertising
technology. But it came with “added benefits” including The
Huffington Post. He described plans for a push into mobile video
offerings, which The Huffington Post can provide.

At an all-hands AOL/Verizon meeting shortly after the deal was
announced, Marni M. Walden, a Verizon executive in charge of
product innovation and new businesses, suggested that Verizon
was keen to supplement licensing deals with Nascar and the
N.F.L. with more content for its users, according to a person
who was present. Verizon’s fierce rival AT&T has announced a
joint venture with the media executive Peter Chernin to seek
online video opportunities.

Kenneth Lerer, a venture capitalist and co-founder of The
Huffington Post and subsequently BuzzFeed, declined to comment
on the acquisition by Verizon. But he said in general terms that
The Huffington Post had three main areas for potential growth.
“Certainly it can continue to grow internationally,” he said.
“Secondly, video. When you close your eyes and imagine where the
Internet is in X number of years, whether it’s 50, 60, 70
percent video, the whole future is video mobile.”

Third, he said the site could benefit if it were allowed to grow
its own advertising sales force, rather than relying on AOL’s.
Mr. Doctor said there might also be a less glamorous
alternative: Verizon might begin putting The Huffington Post on
its devices as a default app. Some people would inevitably keep
it, rather than deleting it, “and that could provide you a
decent amount of traffic.”

http://www.nytimes.com/2015/06/03/business/media/huffington-post-
in-limbo-at-verizon.html?src=relcon