Insight: AOL banks on HuffPost to turn profitable next year

Mon Dec 23, 2013 6:55pm EST
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By Jennifer Saba

NEW YORK (Reuters) - It's the holiday season and Arianna Huffington, the influential woman behind the popular news website that bears her name, is busy buying sweaters - some 700 of them - as gifts to her employees.

From brands like J.Crew and White + Warren, the sweaters are placed at the desks of The Huffington Post staffers who can swap or trade them before posing for an annual group photo.

When The Huffington Post was sold for $315 million nearly three years ago, Huffington told her new boss, AOL Inc Chief Executive Tim Armstrong, that they had to uphold the tradition she started when she launched the site in 2005 and personally selected sweaters for her handful of employees.

By the time of the February 2011 takeover, The Huffington Post had 200 employees and was known as a leading source for left-leaning political news.

"I told Tim when we discussed the acquisition the one thing, however big we are, we are able to give sweaters," Huffington, 63, said in an interview early in December.

With AOL's backing - it has injected tens of millions of dollars into the website - The Huffington Post has been able to do much more than give out cardigans every year. Its audience has more than tripled from 25 million people before the AOL deal to 84 million at the end of October, according to comScore data. It has branched out to cover lifestyle, entertainment, business and technology, mushrooming to 60 vertical sites from about 20.

But The Huffington Post has yet to turn a profit for AOL, falling far short of Armstrong's projection at the time of the acquisition that the unit would post $66 million in operating profit in 2013 on $165 million in revenue.

While that has not hurt AOL's share price this year - the stock is up more than 40 percent - analysts said The Huffington Post will become more critical next year to AOL's hoped-for transformation into a digital media powerhouse.   Continued...

A file combination photo shows Arianna Huffington (L) arriving for Glamour Magazine's "Women Of The Year" event in New York on November 11, 2013, and Chairman and CEO of AOL Tim Armstrong smiling during a panel session at The Cable Show in Boston, Massachusetts on May 21, 2012. REUTERS/Carlo Allegri/Jessica Rinaldi/Files