By now, we all know that AOL has purchased the Huffington Post. No one seems very impressed with AOL these days. Their only real strategy for generating revenue, as Ken Auletta and others have suggested, is to pass off barrel-bottom SEO-optimization as real journalism. Meanwhile the HuffPo was, prior to the deal, supposedly leading us into a brave new internet-journalism future. What motivated the deal, then?
Dan Lyons, who has written about the HuffPo for Newsweek, says that Huffington’s venture-capital backers were impatient for a return on their investment. Here he is on HuffPo’s revenue situation:
Last summer when I did my article about Huffington Post for Newsweek, I estimated that they had about 25 million monthly readers and would generate about $30 million in revenues in 2010. That meant they were getting a mere $1 per reader per year!
Compare that to the world of cable TV or print newspapers and magazines which collect hundreds of dollars each year from each subscriber, and then generate hundreds of millions in ad revenue on top of that—and you see the difficulty of the business that AOL and Huffington Post and all the rest of us are in.
But here lies the bright spot in the HuffPo acquisition, and the probable reason for it. If the problem is that we have too many organizations chasing after the same ad dollars, why not roll everyone up and give advertisers fewer choices? Then we can bump the ad rates up. It worked in broadcast TV, when we had three big networks and they operated an oligopoly.
That’s some “bright spot.” It seems to us that the digital revolution ought to open up more exciting possibilities for media than a return to the model of 1960s network television. And anyway, Lyons was just comparing internet media to cable television, and cable sort of messed up that “golden age” of TV oligopoly, didn’t it? Cable TV provided consumer choice sufficient to break up the network oligopoly, and last time we checked, the internet offers roughly seven billion times the amount of consumer choice as cable TV. How exactly does one oligopolize internet news, short of repressive government intervention?
That said, it’s no small challenge to make money in internet publishing. Everyone in the media is trying to crack that code. Advertising will no doubt remain part of the equation, especially for publishers who can reach an audience the size of the Huffington Post’s. But it seems pretty plain to us that advertising alone will not do the job, moving forward.