AOL's HuffPo Acquisition Is a Bid for Social Ad Spend

AOL’s latest big buy brings it one of the highest trafficked independent properties on the Web. But can The Huffington Post also deliver the higher CPMs and display ad revenues CEO Tim Armstrong and his ad deputy Jeff Levick crave?

AOL’s agreement to buy Arianna Huffington’s left-leaning news and entertainment site for $315 million will bolster its audience considerably. According to comScore, in December HuffPo boasted nearly 25 million unique visitors, while AOL’s reach that month was approximately 112 million. Their combined reach is 117 million uniques in the U.S. and 270 million globally.

In a financial disclosure, AOL told investors it believes Huffington Post will deliver ad revenue of over $50 million this year. However net income will be offset by “retention compensation and transaction costs.”

But AOL has yet to prove a content-driven strategy can reverse its declining fortunes in display advertising. The company continues to struggle despite its investments in local news network Patch, content farm Seed, blogs, and online video. Last week it reported a 30 percent drop in ad revenues during the fourth quarter, as display, search and contextual ad revenues all fell in Q4.

HuffPo on the other hand appears to be enjoying healthy sales growth, having “more than doubled” ad revenue in the past year. More important, it’s proving effective at capturing burgeoning social marketing spend. HuffPo Chief Revenue Officer Coleman recently told ClickZ sponsor content and other social offerings are “the centerpiece” of its offering to advertisers. “It’s really our calling card right now.”

In a statement e-mailed to advertisers this morning, AOL global ad sales president Jeff Levick underlined these capabilities. He said the deal was motivated in part by AOL’s desire to “create an environment where brands can talk to users one-on-one.”

He wrote, “The next phase of the Internet will be about building and investing in content and communities that make the world a better and more engaging place to live.”

Whatever direction AOL’s content strategy takes, HuffPo cofounder Huffington will have a hand in it. As president and editor-in-chief of a new division called The Huffington Post Media Group, she’ll oversee all AOL content, including HuffPo, Engadget, TechCrunch, Moviefone, MapQuest, Patch, and other properties.

The deal is expected to close by early Q2.

Kate Kaye contributed.