You heard me. “Content is king.” Back when that was still a viable strategy, I was a teenager. It seems strange to see it come back as a viable strategy, let alone one that is driving both this AOL Deal, and the meteoric rise of Demand Media.
On Monday, February 7th, AOL and the Huffington Post announced the creation of a “New Media Universe” with the acquisition of the Huffington Post for $315M. Arianna Huffington will now transition from being the founder of the Huffington Post to being the leader of the newly formed Huffington Post Media Group. HPMG will cover all AOL content, including not only content on AOL and HuffingtonPost.com, but also on AOL owned content sites such as Engadget, TechCrunch, Moviefone, MapQuest, Black Voices, PopEater, AOL Music, AOL Latino, AutoBlog, Patch, StyleList, and more.
The "New Media" Universe
This new merger is part of AOL’s strategy to become a content based media group, attracting eyeballs – and advertiser revenue – by providing unique, proprietary and valuable content. AOL describes their content as “a scaled and differentiated array of premium news, analysis, and entertainment produced by thousands of writers, editors, reporters, and videographers around the globe.” AllThingsD’s Kara Swisher describes the acquisition as part of AOL CEO Tim Armstrong’s “aggressive, if risky, strategy to focus the long-troubled company as a content and advertising powerhouse… For AOL, the deal gives it a popular branded site that is very good at generating lots of page views and impressions very efficiently–which is the company’s whole thrust these days.”
The move to premium content is part of AOL’s attempt to discover new revenue models. Over forty percent of AOL’s revenues are still coming from dialup subscribers, 75% of which have broadband service in addition to an AOL dialup account (the company’s failure to clarify that users can keep their @aol addresses without dialup service is to blame). With the acquisition of the Huffington Post, AOL gains traffic that is easy to monetize in three ways. First of all, the traffic increase is from HuffPo’s young, affluent audience and will allow AOL to increase rates on premium content (of which they will have more with the content expansion). Second, the Huffington Post’s practice of aggregating the first few paragraphs of stories from other sites has made HuffPo an SEO magnet. Digital executive Ian Schafer was quoted as saying, “AOL just bought SEO”. This will in turn increase traffic, which will create more display banner impressions to be sold. Third, AOL will increase non-display revenue through the influx of traffic by taking advantage of the millions of additional eyeballs to their other advertising products. It is likely that there will be an uptick in volume on Sponsored Listings (AOL’s search and contextual text ad products).
AOL may also begin to leverage their prowess in content in more revenue generating ways. IMS hopes that a focus on quality content means that more advertorial opportunities will be made available. It’s possible that AOL may also use a future reputation as a high quality content site to engage in revenue sharing with other sites. For example, AOL and Everyday Health announced a partnership last month where Everyday Health would be the destination for all AOL health traffic. AOL users interested in a health story will soon be driven through to an Everyday Health site to read it. For this traffic, Everyday Health shares revenue with AOL. If more users visit AOL for quality, trusted content, AOL could extend partnerships like this to other networks willing to pay for the quality traffic.
IMS will continue to watch AOL and HuffPo for further developments and opportunities. At this time, we anticipate the greatest opportunities for our clients to be in Sponsored Listings and contextual ad opportunities: two AOL products which have always performed well for us.
