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Why Did Arianna Huffington Sell HuffPo? Payoff and Paywalls, Baby!

As the dust settles a bit around the AOL (AOL) acquisition of the Huffington Post, there are signs that many bloggers and readers who cranked out posts or comments for no pay are upset. But, really, what did they expect?

A media critic colleague of mine (who wished to remain anonymous) wittily observed the following:

Republican Arianna Huffington goes Democrat to create a lefty blog in which thousands write for free and help enable said "Democrat" to cash out for $300 million a mere six years later.
And even more to the point, Huffington did it with the perfect timing. The conditions that allowed HuffPo to capitalize on all that free search engine optimization help are in the midst of change. A few more years, and the bottom might have dropped out as the sources of its most popular content go one-by-one behind pay walls. That's why it had to happen the way it did -- because for a brief, shining Camelot moment, the stars aligned and everything was possible. Even AOL paying $315 million for the Huffington Post.

Bloggers and readers grumble
It's unsurprising that many HuffPo bloggers would be upset, just as a number of people who wrote for Associated Content were angry when Yahoo (YHOO) bought the company for more than $100 million. Here's a clip from one AC writer who called for a seat at the table with Yahoo (click to enlarge):

This piece that ironically was on Associated Content no longer exists, no surprise. At least they got paid something. All along, though, Huffington said that exposure was the pay. (Although the vast majority don't even get much exposure.) And now she says that the only change for HuffPo bloggers will be "more people reading what you wrote." More exposure, or not.

Many of the site's readers were also upset. Of a sample of 500 comments that the Daily Beast took (though no telling whether they were representative), 81 percent "opposed the acquisition in terms that ranged from confused to pessimistic to, most frequently, downright livid."

"We made HuffPost and we are being abandoned," one aggrieved reader wrote. "They will aim for the center. That's where the big money is." Another added: "Corporate greed and intelligent analysis don't merge." Others couldn't even bear to read the news: "I have no interest reading about yet another monopoly creation and the slow erosion of diversity in terms of news sources."
Bloggers agreed to write for self-promotion to a site supposedly not making anything. Readers signed on to a cause only to find that it was a business.

Money time
And a business it was. No co-founders front millions of their own dollars and get professional investors for a cause. They do it to eventually make money. Notice how in the following interview with Kara Swisher of All Things Digital, Huffington talks about getting away from that "obsolete way of looking at everything as left versus right" (about 7 minutes in):

When Swisher pointed out that she was known for a left political orientation, she said, "People have not really moved up to see where we've been going in terms of our content and in terms of bringing in voices from all around the political spectrum." Yup, that wacky, politically cosmopolitan HuffPo.

It's business, kids.

Music analogies
Music industry blogger Bob Lefsetz had an interesting take on the AOL-HuffPo marriage, comparing it a music business story:

Arianna did it the old way. She signed to a label. Which made her famous. But then she had to do what the label said. She HAD to sell. Her investors wanted that three hundred million CASH!

Like an act is gonna tell the label what to do. Ha!

It was also a chance to make the business pay -- maybe the only chance. Oh, HuffPo was supposedly profitable, if you can believe what private companies say about their profitability. But not hundreds of millions of dollars worth.

Harnessing the storm
More importantly, HuffPo had harnessed a peculiar confluence of chance events. Huffington was able to get writers to buy into the self-exposure and readers to buy into the cause, which worked together to fuel search engine optimization. At the same time, HuffPo was an aggregator and link site. The content that was unique to it helped the type of updating and linking that is good for search position. But what most people looked at were links and aggregation.

Here's where paywalls come in. A growing number of media sources want to keep the aggregators out. The New York Times is about to drop behind a paywall. MediaNews Group, publisher of the Denver Post, says that it didn't see a traffic drop when paywalls when into place. No sudden increase of income either through subscriptions, but if the traffic doesn't suddenly plummet, then the company will probably keep going to train consumers out of the assumption that all content should be free. The Financial Times? Paid. Wall Street Journal? Paid. Who's next?

That's a problem for HuffPo. Yes, the site rivals the New York Times online for traffic and market value. And yet, HuffPo is a creature of electronic media:

But thanks to some funding from Softbank and Greycroft Partners, and the web savvy of people like Jonah Peretti and CTO Paul Berry, The Huffington Post just kept growing and growing, and made use of all the social tools at its disposal, from comments and Twitter to Facebook's social graph plugins.
Even with big names donating their writing, HuffPo is ultimately dependent on the kindness of other media sites. Fewer top sources for links and aggregation means less material and, as a result, less traffic. (And if you grab stuff from behind a paywall, especially if you grab too much, it becomes harder to duck charges of copyright infringement.) The self-feeding cycle can run down as well as up.

The AOL acquisition brought cash from a company that happened to still have it into a business that didn't while the former still had a reason to buy the latter. And that's show biz. Or, as my media critic colleague says, "You've got fail."


Image: morgueFile user matthew_hull.
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