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What Retailers Can Learn From AOL's Huffington Post Acquisition
The First Tale: When I was a senior editor for Business Week in the late 1970s, the leading weekly business magazine was America’s most profitable publication, the perennial leader in advertising pages with margins estimated at 40%. In the 1990s, when McGraw-Hill toyed with the idea of selling its top brand, analysts estimated Business Week would command $1 billion. Last year, Bloomberg bought it for $5 million.
Why did Business Week’s market value plunge? It hadn’t compromised its editorial quality, cut its reporting staff or even lost circulation. It just failed to pursue a web format as aggressively as it should have. In my mind, this is the most dramatic example of the disaster that befell news publications that made a tardy transition to the web and continued to rely too much on the printed word.
Retail chains will suffer the very same fate if they fail to aggressively pursue Internet retailing. That’s because the chains no longer are challenged so much by one another but by newcomers who have mastered web-based retailing. Business Week was not defeated by the Wall Street Journal so much as it was by dozens of new online business information providers.
The Second Tale: This week, AOL bought the Huffington Post, which was started by Arianna Huffington and Kenneth Lerer as a liberal blog in 2005. Under Huffington’s direction, it mushroomed into a content rich news service with a couple dozen editorial sections, from health & nutrition to travel. Fully 85% of HuffingtonPost.com is oriented to non-political topics, and its political blogs now cover the entire ideological spectrum. Though it has 200 full-time staffers, much of its editorial is still contributed from outside writers, and its articles generate thousands of comments from its legions of loyal fans. Early on, it mastered the art of organic search to secure high rankings in Google searches, and it pioneered the media’s use of Facebook and Twitter to grow its readership.
AOL coughed up $315 million, virtually all of it in cash, to buy this operation not because of its profits (it scratched out its first profit last year) or because of its estimated $30 million in 2010 revenue, although Huff Post's sales are expected to double this year. Rather, Huffington Post’s real value rests in its massive amount of web-based editorial content that each month attracts 25 million unique visitors, making it one of the world’s leading news web sites. Say that again—one of the world’s leading news sites, built in a little more than five years with an initial investment of $1 million.
Through its Huffington Post acquisition, AOL takes a huge step forward in implementing its strategy of becoming a premier news and information provider on the web. It gets Huffington Post’s rich editorial content and a high-profile web publisher who possesses under her signature coiffed hair a brilliant mind with a strategic vision for using the web to create a new information industry, one that just might totally replace the old one. In her new role, Huffington will not only continue to grow her existing web site but manage the growth of all of AOL’s newly acquired or start-up information platforms, including Patch (AOL’s local news initiative), TechCrunch and MoviePhone.
What can retailers learn from this tale of two publishers? I believe the lesson is this: the web could well do to retailing what it is doing to print publishing—become the dominant force in the market. Of course store retailing isn’t going to be replaced by e-retailing, but online retailing, pursued with the same gusto that Huffington has pursued online news and commentary, will account for a much, much bigger share of retailing than most store chain executive are currently planning for. My advice to those chains is this—do whatever you have to do to avoid Business Week’s fate.
My other advice to retail executives is to make sure you attended the 7th Annual Internet Retailer Conference & Exhibition in San Diego on June 14-17, where attendees will hear 175 expert speakers discuss the future of e-retailing and view the exhibits of 475 e-commerce solution providers. One of our featured speakers at IRCE 2011, the world’s largest e-commerce show, will be none other than Arianna Huffington, who will discuss how she came from outside publishing and used the web to challenge the world’s largest and most established news gathering organizations. Check out the show at IRCE2011.com.