The future of The Huffington Post looks murky after the announcement that Verizon Communications (VZ +1.28%) had agreed to acquire its parent company, AOL (NYSE: AOL).
The potential conflicts of interest between the two companies are easy to see. The Huffington Post is a liberal blog and news aggregator, while Verizon generally leans toward the right. For example, the Huffington Post railed against the National Security Agency's mass surveillance programs and supports net neutrality. Verizon took an opposing stance on the latter issue and previously turned over telephone records to the government.
Source: Screenshot
Verizon has promised that The Huffington Post will maintain its editorial independence, but actions speak louder than words. Last year, Verizon shuttered its fledgling tech site, Sugarstring, shortly after writers were warned they could not report on "spying or net neutrality." The New York Times also reported that Arianna Huffington was not sure if her plans for expanding the Post with more videos, bloggers, and potential acquisitions could be executed under Verizon.
How much is The Huffington Post actually worth to Verizon, and could the new owner dramatically alter the site?
Verizon will not shutter The Huffington Post
According to AOL CEO Tim Armstrong, the Post's audience grew tenfold from about 20 million users in 2011 to over 200 million today.
Though the exact financial figures are unknown, a leaked document published by The Smoking Gun reveals that AOL expected Post annual revenue to rise from $60 million in 2011 to $165 million by 2013. Its earnings before interest, taxes, depreciation, and amortization was expected to rise from $10 million to $58 million.
The New York Times also reported that people with "knowledge of its current finances" said the site now generated "hundreds of millions" in revenue. That is admittedly a drop in the pond for Verizon, which generated $127 billion in revenue last year, but such a major online presence might help the company expand its mobile video and advertising businesses.
Looking ahead, The Huffington Post probably will not have to worry about Verizon censoring its content, due to the public relations fallout from the Sugarstring fiasco.
But does Verizon need The Huffington Post?
This would not be the first time The Huffington Post has adapted to change. The Post was originally a "super blog" that attracted celebrity bloggers and humorists who wrote insightful articles. But under AOL, it evolved into an aggressive news aggregator that churned out articles mainly based on trending topics. It was a controversial move, but the site was simply following the money to generate more ad revenue from more readers.
Verizon could theoretically expand AOL blogs such as the Post, TechCrunch, and Engadget by turning their video content into stand-alone video channels. With AOL's video tech, which was strengthened by its acquisition of video ad company Adap.tv in 2013, Verizon could deliver that content with ads through its new online video service. Verizon already has a small but growing presence in delivering video -- its FiOS TV service reaches 5.6 million U.S. households, and it previously signed a deal with the NFL to let users stream games on their phones.
Verizon's FiOS TV. Source: Verizon
However, it is unclear if the addition of AOL sites will actually boost advertising revenue. According to eMarketer, AOL controlled just 2.1% of the U.S. digital ad market last year, compared to 38.2% for Google and 17.4% for Facebook.
There has also been speculation that Verizon could eventually spin off or sell The Huffington Post. The site was most recently valued at $1 billion, according to The New York Times, more than triple the amount AOL paid for it. Interested parties include European media companies Le Monde and Axel Springer, private equity firm General Atlantic, and Napster founder Sean Parker.
The key takeaway
Regardless of what happens, Verizon's top and bottom lines will not be driven by the fate of The Huffington Post. However, it will be interesting to see if Verizon will expand the Post, TechCrunch, and Engadget into larger media channels or just sell them off to the highest bidder.
