The Huffington Post, the creation of Arianna Huffington, was featured in an article by Richard Siklos in the November 12 issue of Fortune magazine. The article charts its rising acceptance as a media outlet to be taken seriously. What was intriguing about the story, however, is that it outlines a path for next generation new media moguls.
Most traditional news organizations make big investments in the news-gathering areas of their business. This is expensive and when ad revenues fall (or fail to grow fast enough to suit Wall Street), this is one of the first areas to be sacrificed. Unfortunately, this also diminishes the product. Old media institutions are slowly embracing blogs, but they still carry a lot of old media overhead with them. The Huffington Post, however, operate with a different set of economics.
It uses a large team of unpaid celebrity (and emerging) bloggers to build readership and concentrate the cash on editorial and management resources to maintain consistency and quality in the product. Bloggers contribute on their own schedule and, according to Ken Lerer in an interview with USA Today, receive the benefit of the exposure, promotion and distribution of their work that a high traffic venue offers. There have been some complaints in other quarters of the blogospherethat this is an unfair trade, but so far the bloggers at the “HuffPo” (as the blog is known), don’t seem to be too concerned. This creates a virtuous cycle: name bloggers build traffic and readership, which in turn attracts advertisers. And readership of the Huffington Post has grown rapidly.
Today, the Huffington Post, which about two and a half years old, has a paid staff management / editorial of 43 and a blogging staff of 1,800. Monthly visitors range from 800,000 (ComScore) to 1.3 million (Nielsen / Net Ratings) and the site gets tens of millions of page views and hundred of thousands of comments each month. And its credibility has shot up in the blogosphere and elsewhere. Technorati ranks it number 5 among all blogs in the number of links from other sites.
Now enter the venture capital groups. The HuffPo has received a total of $10 million in financing from Softbank Capital, Greycroft Partners and individual investors through diesem Link. Though the exact amount of equity sold by the founders isn’t known, TechCrunch speculates that the deal could now make the company worth somewhere between $60 million and $100 million.
While the ad revenues for the Huffington Post aren’t published, the company has created its own ad sales staff and is moving away from its ad sales partnership with Barry Diller’s IAC. This is another indication that the company’s strategy is paying off. Is the HuffPo the prototype for the next generation of news media?
It may be a bit early to make that call, but certainly its open publishing model is something that traditional media should note. It may be easier to morph from an A list blog to a news media success than the other way around. Can true journalism flourish in such an open model? I believe it can. The rise of sites like the Huffington Post may mirror the early history of major newspapers.
In summary, the playbook for next gen news media moguls might go something like this:
- Build traffic cred with celebrity and emerging bloggers
- Use the traffic to draw advertisers
- Secure venture capital based on advertising revenue growth
- Use the additional capital to strengthen your management team and expand your journalistic offerings
Good night and good luck!
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