Last night I saw a tweet saying that AOL was going to buy the Huffington Post for $31.5 million. Yowza, I thought. That’s a pretty rich valuation. Maybe 20x forward earnings? Who knows?
But no! AOL actually bought HuffPo for $315 million. I mentally put in a decimal place where there wasn’t one. I don’t even know what to think about this. It sounds completely crazy to me. The odds of this being a good deal for AOL stockholders seem astronomical.
Still, maybe I’m the one who’s crazy. After all, I haven’t paid a lot of attention to either HuffPo or AOL lately. I’m a huge skeptic of synergy arguments of all kinds, but maybe Arianna is right when she says that in this deal, 1+1=11. Anybody in comments want to make the case in favor of this being the deal of the century?
UPDATE: Felix Salmon puts some numbers to the deal and defends it as a good one:
The $315 million that AOL is paying for the Huffington Post is roughly 3X the valuation seen at its last capital raise two years ago, is 10X its 2010 revenues and is roughly 5X estimated forward 2011 revenues. Those are all big numbers, but not insanely so….My feeling, then, is that this deal is a good one for both sides. AOL gets something it desperately needs: a voice and a clear editorial vision. It’s smart, and bold, to put Arianna in charge of all AOL’s editorial content, since she is one of the precious few people who has managed to create a mass-market general-interest online publication which isn’t bland and which has an instantly identifiable personality. That’s a rare skill and one which AOL desperately needs to apply to its broad yet inchoate suite of websites.