by Ben Elowitz

Last month, I wrote a post titled “Associated Content is Yahoo’s First Big Media Move. Here’s What Should Come Next,” in which I pushed Yahoo to acquire premium content properties to overcome the commodity signal they sent by acquiring AC.  I said at the time that Huffington Post’s curation model “crowdsources content but applies a strong point of view and features premier branded names, lifting it above the commodity fold.”  For Yahoo, Huffington Post is the perfect combination of premium and economical.

Now, over this last weekend, Erick Schonfeld wrote at TechCrunch that deal discussions between these two publishers are underway for a content partnership or outright acquisition. Though Arianna Huffington denies it, other sources indicate that HuffPo has been on Yahoo’s short list, and I wouldn’t be surprised if conversations have been ongoing.

While  Yahoo had previously announced intentions to compete in news by hiring brand-name reporters, that direction is fraught for the big portal:  the news category is difficult to lead with a heavy demand on consistently breaking  news — and it would take years for Yahoo to build the credibility in original reporting to become a true audience magnet.   And the prize for winning even if they do?  It could be losses, not profits, as has been born out by the experience of myriad old media outlets who are now making over their businesses.

What Huffington Post represents is a far better road for Yahoo to go from portal to destination in a realistic way.  HuffPo can draw audiences not by competing with the news outlets on reporting but with great access and point of view – both of which are within Yahoo’s brand and execution reach.  It would serve as an anchor property with true destination draw.

Indeed, Huffington Post may be unique among the news-oriented sites of the portals, curators, and aggregators in having earned true premium positioning.  They did so by emphasizing a strong and reliable point of view along with affiliation with notable brands (such as regulars Arianna Huffington herself, Bill Maher, Harry Shearer, and Rosie O’Donnell, along with guest posts from a robust range of influentials).  Along the way, the site has also earned an outstanding brand and destination audience of 22 million (comScore), consistently garnering visits from both search engine referrals (14% of traffic from Google according to compete.com) and social networks (16% from Facebook).

This destination draw is critical for Yahoo.  At Yahoo’s home page, 73% of monthly viewers are there to get their mail – and that usage is shrinking at (2%) per year (comscore April 2010 vs. April 2009) vs. a US internet universe which grew at 10%.  As Yahoo commits to a media-company destiny, its strategy must be to create high-end destination titles that will draw premium advertising – not just keep mail users on-network longer.

For those in charge of Yahoo’s media properties, David Ko and Jimmy Pitaro, they would get two other benefits to leverage:  HuffPo gives Yahoo a premium curation model prototype for it to replicate; and a DNA transplant to bring in the talent and experience to scale that model.

As far as the first, Huffington Post has shown itself to be the best of the curators, establishing a strong point of view that draws a huge audience with near-zero cost for original content.  And the model – the fame and traffic of Huffington Post beget contribution from interesting people, which drives more fame and traffic for Huffington Post’s brand – is replicable in other categories, as HuffPo has shown with its entertainment category rumored to already reach an audience of 10 million monthly, according to internal measurements.  This is the sort of model that Yahoo should be banking on, as commodity content alone will never make Yahoo a premier media company.

Perhaps more importantly, there is nothing to catalyze the adoption of a new direction like bringing on a talented and effective crew.  An acquisition of Huffington Post brings not just a branded destination, but a whole crew of operators with a scarce and effective set of skill, approach, and attitudes.  Those genetic elements are exactly what Yahoo needs to quickly set a new approach to existing properties with large audiences, such as entertainment, shine, and omg!, as well as to each new title launched.

All in all, an acquisition of Huffington Post would form the perfect foundation for Yahoo’s new ambitions as a premier media destination – and would be well worth the several hundred million dollars it would surely cost to set a bold and profitable strategy for Yahoo to be a premier media company.

  • http://www.vox-pop.co.uk Kagem

    I am not a fan of the HP* but I do respect anyone who can hustle in media and make entrepreneurship work so Arianna has that locked.

    Whether HP would be a good look for Yahoo? I am not sure about that. I see it as more of a strategic fit for The New York Times, more so than Yahoo but I do follow your train of thought of the strong brand that Yahoo could benefit from.

    Even with the David Beckham sponsorship of Yahoo (yay!), I think you are right when you say that Yahoo are trying to rebrand into being a media company for sure, even with the strapline on the DBeckham advert about getting 'exclusive content'.

    * – Still don't know how they are making so much turnover in advertising yet not paying many of their writers. Ludicrous (if they are still doing this).

  • http://www.siliconvalleywatcher.com/ Tom Foremski

    I agree with you but are you saying HuffPo is worth several hundred million dollars? That's way too high.

  • http://www.digitalquarters.net Ben Elowitz

    Reports have Huffington Post on track for $100 million in revenue or more in the next year or so. Given the extremely high growth rate, the good margin that should come with how they've structured their business; and the strategic value of what they can do for an acquirer beyond just generating revenues and cash flows, I think it would be reasonable to pay 5 times their revenues or more.

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