Variety, With A Broken Business Model Of Its Own, Wonders About Huffington Post's Business Model

Categories: Internet TV,TV Business

Written By

November 3rd, 2012

In an article inVariety, Brian Lowry wonders about the business model of The Huffington Post.

Huffington Post -- with its tendency to overreach, much like conservative counterweight the Drudge Report -- raises nagging questions about what the future holds, both in terms of qualitative coverage and how it's going to be a viable business model.

Huffington Post data (when AOL acquisition was announced in Feb, 2011: NYTimes, WSJ, GigaOm)

  • 25 million unique visitors/month (Dec, 2010)
  • 500 million pageviews/month
  • $31 million revenue in 2010, $60 million estimated revenue in 2011
  • 200 employees

At 2.5 million pageviews/employee/month, HuffPo likely wasn't profitable when acquired. (by comparison, TVBTN does ~9 million/employee/month).  How the HuffPo business model has changed since then is anybody's guess outside the AOL Finance department, but AOL was betting (foolishly, IMO) on growth/synergy/witchcraft.

On the other hand, I'm pretty sure that Variety's current business model is completely broken. A month ago the entire business was acquired by Penske Media (owner of Deadline.com and TVLine.com among others) for what was seen as a fire sale price of $25 million. Even that price was generally accepted to be uneconomic without significant revenue growth and cost reductions (one story mentioned the shock worthy compensation levels for some senior Variety staffers). And unlike HuffPo, I doubt that Variety's in any sort of growth mode, and that the purchase price was substantially based on goodwill for the name of the business alone.

Pot, meet kettle.

 
  • Eugene Resler

    Ah, Variety…haven’t checked them out since they went to paid membership only. Good thing there’s a million other places to get entertainment headlines and reviews. Way to become irrelevant, Variety.

  • Roy

    @Eugene Resler: Just don’t allow Javascript to run in your browser when visiting the site. Then you don’t need a subscription and every part of the site is accessible.

  • JP

    drudge has a simple model which it has been successful for years. if you want news…people go to drudge than huffington post.

  • iggy agrimotor

    Forget Lowry. He’s gonna get swept out the door.

  • Hugh

    “haven’t checked them out since they went to paid membership only” exactly

    Will try the Javascript thing, but Its been a while since someones linked me to a story.

    Deadline seems to be the major source of big entertainment news nowdays

  • The End

    @Hugh

    I agree, though TVBythenumbers and Deadline are two completely different kinds of websites. TVBYTN focuses more on the ratings + press releases, and deadline on virtually everything associated with said shows + ratings. Essentially both being great websites but going different directions.

  • cas127

    HuffPo only had about 200 employees at acquisition by AOL?

    As much as I hate to say it (the site is a travesty in many ways) HuffPo has continued to grow significantly – Quantcast has them at about *60 million* uniques/month now (for comparison, NY Times has about 17 million and Drudge about 16).

    Why is HuffPo so apparently popular?

    1) The celebrity focus brings in the masses while the political content provides a patina of “seriousness” (maybe) and an illusion of “influence”

    2) The badges/blogging system greatly extend user loyalty and reach into the “long tail” of linking sites (DailyKos discovered this first but HuffPo has *hugely* sucked away DK’s audience – which is down to 2 or 3 million uniques now).

    3) HuffPo’s site engineers really know how to game the hell out of Google and the measurement systems like Quantcast, Compete, etc. (HuffPo’s growth really does seem *odd* in relation to essentially all other content sites…)

    Having said all that, AOL still probably vastly overpaid ($300 million) for HuffPo.

    The killer in internet advertising is the extremely low CPM rates – due to the essentially infinite ad space available on the internet.

    The Facebook behemoth, with targeting capabilities out the yin-yang, is reported to have gotten 40 to 50 *cent* CPMs on average last year.

    So let’s say HuffPo is up to 1 billion page-views per month now.

    That is 12 billion per year, or 12 million “M’s” at 50 cents per = $6 million per *year*.

    HuffPo was *claiming* about 5 times that much revenue back in 2010 with less than half the traffic…I don’t think so.

    I don’t know if AOL’s financials disclose enough HuffPo stats to figure out a CPM rate for HuffPo but I think it is unlikely that HuffPo (with its enormous ad inventory) is able to convince media buyers to pay much, much higher CPMs than they would have to pay elsewhere (including ad exchanges).

  • http://tvbythenumbers.com Bill Gorman

    “2) The badges/blogging system greatly extend user loyalty and reach into the “long tail” of linking sites (DailyKos discovered this first but HuffPo has *hugely* sucked away DK’s audience – which is down to 2 or 3 million uniques now).

    3) HuffPo’s site engineers really know how to game the hell out of Google and the measurement systems like Quantcast, Compete, etc. (HuffPo’s growth really does seem *odd* in relation to essentially all other content sites…)”

    I agree with these reasons. And while lots of sites do #3 (or at least try to), I think #2’s “write for us for free” system has been HuffPo’s key success factor.

    “Having said all that, AOL still probably vastly overpaid ($300 million) for HuffPo.”

    Completely agree with that.

    “The killer in internet advertising is the extremely low CPM rates – due to the essentially infinite ad space available on the internet.”

    True.

    Although I think your estimates for page CPM are low. The $0.50 CPM for Facebook is likely a per *ad* CPM not per *page*, I think a very broad range for HuffPo *page* CPM is probably $3-$10. Quantcast has HuffPo pageviews at 800m/month, so I think their revenue range is probably in the $2.4m-8m/month or broadly $30-100 million per year.

    While that’s a very broad range, I’m very confident their annual revenue isn’t either $10m/year, or $300m/year.

  • Temis

    Why bother with Variety when Deadline is free and the comments are much more fun. Snark off the scale!

  • cas127

    Bill,

    Thanks for the feedback – good point about how multiple ads per page can goose up *per page* CPM.

    It is still mind boggling (blogging/badging/etc. aside) that HuffPo has in October 2012 reached ~60M uniques from 25M less than two years ago.

    Granted, the election is goosing the political side and the drive-by celebutard audience is always scarily large.

    But 60M uniques puts HuffPo at #11 at Quantcast – almost all other sites at these heights are *tools* rather than content (Google/Youtube/Facebook/Twitter/Amazon/Wikipedia/Pinterest).

    Granted, Yahoo is up there too and it leans heavily on content but its backbone is the email service – that feeds the audience into the maw of the content machine.

    Blog hosts like WordPress/Blogger/Blogspot/Tumblr are all up there too (with an amazingly tight grouping of 49M to 52M monthly uniques).

    I don’t know much about HuffPo’s true blogging add-ins (the ugliness and idiocy of the site turn me off so much I’ve never dug into it) – but I know they’ve “invited” thousands and thousands of D-list celebs on down to “write” for them – but can anyone in essence create their own “blog diary” a la Daily Kos?

    I see the badges and “follower” numbers (thanks FB, for introducing “friend” spamming to the world…) but I don’t know if anyone can simply start up their own HuffPo blog or if they have to be given permission by HP.

    Another factor – the cross-marketing of the HuffPo/AOL audiences.

    AOL was (is) slowly dying in terms of subscriber numbers but they still have a relatively massive email hosting base – so a la Yahoo, they can feed millions of email readers into HuffPo’s gullet.

    That may account for a *lot* of HuffPo’s growth from 25M to 60M monthly uniques in less than two years – AOL is still getting 46M uniques under its own power – and 25M + 46M = 71M, so the traffic funneling might be working very well.

    Takeaway lesson?

    Closely cross-market with an internet “tool” site to really goose both sites’ uniques…may not matter for the long tail of niche sites like this one…but who knows?

    Of course, there aren’t that many email hosts with millions of accounts out there…

  • James C.

    Note that HP uses a lot of slideshows. Each slide has its own ad. So a slideshow of 50 state rankings delivers 50 ads.

  • http://tvbythenumbers.com Bill Gorman

    “Note that HP uses a lot of slideshows. Each slide has its own ad. So a slideshow of 50 state rankings delivers 50 ads.”

    Absolutely nothing wrong with that. We’d do it, if we had a good way of setting them up.

    That being the case, our average Pages/Visit is higher than HuffPo’s.

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