After Deal, Whence Huffington Post?

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 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 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 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 startups, 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 Arianna 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 NFL 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. 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."