Arianna Huffington Wants AOL to Be 'My Last Act'
The Huffington Post co-founder and AOL boss Tim Armstrong also discuss opportunities for more women's content and the expected advertising upside of their $315 million deal.
NEW YORK – Arianna Huffington and AOL chairman and CEO Tim Armstrong emphasized early Monday that they plan to work together for a long time after AOL late Sunday/early Monday unveiled the $315 million acquisition of the Huffington Post.
"I told Tim that I want to stay forever, that I want this to be my last act," Huffington told Wall Street analysts on a conference call.
Making a similar long-term commitment, Armstrong emphasized that Huffington has a guaranteed multi-year employment deal with AOL that is open-ended. "Arianna is someone we'd rather have inside our building" than outside, he said when an analyst asked if AOL couldn't have simply struck a content partnership with the Huffington Post.
The conference call, which took place before an employee town hall meeting, also yielded more color on how the deal came about and what content and advertising ramifications it is likely to have.
Huffington explained how the deal came together over the past weeks, even though the online media firm she co-founded in 2005 was originally planning to look for additional investments this year with a possible IPO down the line.
"The Huffington Post was not for sale," she said. "Nobody was in a hurry to cash out. It was really the opportunity that Tim provided us that...determined the timing" of the deal.
The executives on Monday also further explained the rationale of their deal as Wall Street seemed to have some doubts about what was seen as a high price tag. AOL shares declined as much as 4 percent before closing down 3.4 percent at $21.19.
"There are real synergies here to be had," Armstrong emphasized after former AOL boss Steve Case overnight in a tweet doubted that 1+1 could really equal 11 in this case.
Both he and Huffington cited local and women-focused content as key content opportunities.
And Huffington highlighted that just like AOL, HuffPo has been providing content in a range of areas. It has 26 sections these days after starting off with political coverage. "We've really transformed ourselves," she said, highlighting that only 15 percent of traffic comes from politics nowadays and that a recently launched divorce section quickly became her 7th ranked site in terms of traffic. That may have been a nod to possible concerns that the liberal reputation of her site may cause concern among some AOL advertisers or content partners by possibly ending its reputation as a nonpartisan online firm.
Huffington also signaled that the HuffPo will remain committed to providing quality content as it has done to-date. This may have been a nod to fans, some of whom overnight expressed concern that the AOL deal would mean the end of the HuffPo as they know it. By 7:45am ET, a post from Huffington about the deal had drawn more than 1,700 comments, with some expressing disappointment.
One post from a person using the name Spinns17 said: "Wall Street has a hold of this now. looks like this is the end."
JimR said "Well, it was fun while it lasted, HuffPo," and UnionJok commented: "Say it ain't so."
Meanwhile, the advertising sales integration should see AOL maintain all people from both salesforces, Armstrong said, adding that the top 100 ad partners for both differ enough that the combined firm can "bring in different customers on both sides." Sell-through rate and ad rates are slightly lower on the HuffPo side, providing upside opportunity, he added.
AOL CFO Arthur Minson predicted HuffPo to bring in more than $50 million in revenue this year and $10 million in operating income before depreciation and amortization, with revenue going to a $100 million run-rate in the next 12 months.
"AOL is not a one-year turnaround story, but we did not come here for it to take five years," Minson said. "We have been working very hard to make 2013 the year AOL returns to OIBDA growth and this deal will help us achieve that goal." For example, he mentioned that AOL lost about $20 million last year in areas where its content overlaps with HuffPo and said the company was looking to turn that around.
Minson also hinted at possible layoffs, citing $20 million in expected cost savings from the deal and the same amount for restructuring charges tied to overlapping costs.
Similarly, Armstrong told analysts that the acquisition will "add significant acceleration to our company, to our strategy and also to our shareholder returns." He added that the HuffPo "brings another level... for us to serve brand marketers," with the last few hours already bringing some positive talks.
And Huffington echoed the combination is "absolutely a perfect fit" and will provide an "enormous acceleration of both visions."
Armstrong said his team will focus on the integration of the two firms over the next 30 days, emphasizing that he expects to move so quickly because he expects much less disruption than in other deals of this size.
The two leaders of the businesses also once again lauded each other's vision. Armstrong said Huffington is "someone we've watched from afar," a "very good entrepreneur" and really passionate.
And Huffington said she indeed a great alignment of ideas and visions for the future of online content as she spent more time with Armstrong in recent weeks. For example, she said she spoke at an AOL sales gathering in New Orleans last week before the deal was finalized.
Armstrong said she also spoke to AOL advertisers at the Super Bowl, which the duo attended together.
Since their visions seemed so similar, it must have seemed natural to people that they spent time together, which is why they pulled off the deal "hidden in plain sight," Armstrong said.
It was not disclosed how much Huffington personally will make in the deal and how much her employment contract with AOL will pay her. "I don't know what their ownership is, but I assume it will be $100 million or more for her" in terms of payout from the $315 million acquisition itself, Needham & Co. analyst Laura Martin said.