Can Arianna Save AOL?

Arianna Huffington is coming to the rescue of AOL (NYSE: AOL  ) .

The struggling dot-com giant is acquiring The Huffington Post, tapping its charismatic namesake leader as its new content chief. The largely cash $315 million deal lands AOL a magnetic political website that attracts roughly 25 million unique visitors every month.

It's a gutsier move than you probably think. The Huffington Post's commentary leans primarily to the left. Arianna Huffington is a rock star among liberals, logging regular appearances on Comedy Central's The Colbert Report. She assisted The Daily Show in its rally against the Tea Party last year. Taking sides when it comes to politics can be as lucrative as it is incendiary. The site's columns generate 4 million reader comments a month. However, taking sides also means potentially alienating roughly half of your audience.

How many of AOL's nearly 3.9 million access subscribers will resent The Huffington Post's editor overseeing the site's content? The average tenure of the access provider's customer is more than nine years now. In other words, they're not exactly open to change. They likely skew older than the typical Internet user, too. If you had to guess political affiliations of AOL users, where would your money be? AOL's been shaking off premium subscribers for years, but this still represents 40% of the company's revenue.

The same argument can be raised for AOL's ad-supported properties, but likely to a more beneficial end. Taking a stand will shoo away right-leaning visitors, but also create greater loyalty for those sticking around.

It's a gamble, but AOL had to do this. Advertising revenue took a shocking 29% dive in its latest quarter. It was losing traffic and advertisers anyway. Breathing new life into AOL's content division -- regardless of whether it was coming from the left or right -- at least gives it a fighting chance.

Landing a content chief that also happens to be famous is just gravy. This doesn't feel all that different than the recent decision by the stodgy Newsweek to merge with IAC's (Nasdaq: IACI  ) The Daily Beast, with the latter's Tina Brown taking over as editor-in-chief.

The purchase also seems to cut against the recent push at AOL to beef up content at lower price points. The Huffington Post isn't a site where faceless freelancers work for peanuts, even though many contributors are more than happy to scribe for free.

Yahoo! (Nasdaq: YHOO  ) was rumored to be making a play for Huffington's company last year, around the same time that the portal scooped up Associated Content. BoomTown's Kara Swisher also reports that General Electric (NYSE: GE  ) was wooing the site for NBC Universal before officially handing off the media giant to Comcast (Nasdaq: CMCSK  ) .

In short, The Huffington Post didn't suffer from a lack of gentleman callers on its porch.

Along with TechCrunch -- arguably the most opinionated of the upper-tier tech blogs -- AOL is gobbling up content sites that aren't afraid to brandish some personality. I like the strategy. It makes it that much harder to call AOL a content mill. Last month's scorching hot IPO for Demand Media (NYSE: DMD  ) and the polarizing nature of The Huffington Post may not make this an immediately popular move, but it could be the kick-start that AOL's been waiting for since Tim Armstrong came over.

Do you think acquiring The Huffington Post is a smart or dumb move? Share your thoughts in the comment box below.

Yahoo! is a Motley Fool Global Gains pick. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz wonders if AOL will ever party like it's 1999.  He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy, and it's got mail. 


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  • Report this Comment On February 08, 2011, at 8:52 AM, BroadwayDan wrote:

    It's likely to be the business move of the year. She is a powerhouse - and Huffington Post is exceptionally well done. This is not about politics, so I hope the typical dumb-bell anti-Liberal folks don't waste their time hemming and hawing. I hate Fox News, personally. But from a business standpoint, it's solid. Same exact thing here, except that Huffington has many ideas to go way beyond typical leftie banter. I'm talking about going global, playing to local communities and other ideas. She gets the web like few do. AOL has gone, in my mind from laughingstock to very real candidate for real money.

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