AOL (Nasdaq: AOL) acquired Huffington post for $315 million in February 2011. At that time the valuation for the property seemed steep, however recent data suggest that this property might be more valuable, and could bolster AOL’s valuation. AOL’s Huffington Post primarily competes for traffic with other content providers such as News Corp (NASDAQ:NWS) and Yahoo! (NASDAQ:YHOO). However, HuffPost Live differentiates itself from other video providers by generating live streaming content for 12 hours a day. Furthermore, the HuffPost Live site does not provide content to its users in a traditional fashion, but rather adds a social element to the service which makes it innovative. While videos are offered on the left side of the screen, the interface reserves about half of the screen’s total space to comments where users watching a telecast can start debating directly. We think that HuffPost Live’s social platform has been a game changer for the industry, and boosted user participation for HuffPost, which is evident from the 100 million unique visitors to the website.  In this note, we explore the value created by HuffPost for AOL.
Huffington Post In Numbers
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Huffington post website has consistently featured in the list of English-language publishers with the most content on Facebook (FB). While Huffington Post recorded a total 67.4 million interactions (impressions from ‘likes’ and comments) in October, interactions fell in November but still led other websites.  Huffington Post currently has over 100 million monthly global desktop unique views (UVs), according to August comScore data, and was the second most-shared publisher on Facebook last month, with over 8 million shares.  The web site has a wide reach with over 48% readership outside the U.S. through operations in 11 countries. The primary reason for Huffington Post’s popularity and reach is its content, which ranges from political journalism to entertainment subject matters.
What is HuffPost worth?
While AOL doesn’t break out HuffPost’s contribution, but recently AOL CEO Tim Armstrong said that Huffington Post is now generating “hundreds of millions” of dollars of revenue at Business Insider’s “IGNITION: Future of Digital” conference. . AOL declined to further elaborate on the site’s revenue. Considering the recent fundraising rounds by digital media startups, these numbers are very encouraging. Vox is estimated to bring in around $50 million in 2014.  BuzzFeed has brought in more than $100 million in 2014 so far, according to a memo from CEO Jonah Peretti.  The New York Times reported that Vice was on track to make $500 million in 2014.  Considering these revenues and valuation at which they raised money, we have estimated the revenue multiple paid for each company.
|In $ Millions||Revenue (Estimated)||Valuation||Multiple (X)|
*2011 valuation of AOL
At the time of its acquisition by AOL, HuffPo was expected to bring in $60 million, at a multiple at five — in about the same ballpark as others. However, if we were to consider similar multiple for HuffPost at estimated revenue of $200 million, then it could be worth close to $1 billion.
We currently estimate AOL at $41.97 (market cap $3.3 billion). Nearly 41% of its value comes from display ads on third party sites due to its comprehensive ad tech platform that it has built over the past few years. However, it derives 28% or $924 million of its value from display ads on its own properties, which includes AOL.com, Huffington post, Tech crunch and Engadget. Considering the recent valuation of internet media companies, AOL’s valuation can be significantly higher as it has three high end properties in Huffington Post, Engadget and TechCrunch. While we are not estimating the valuation of other properties due lack of available data (which could significantly impact AOL’s valuation), if we were to consider $1 billion valuation for Huffington post, then this property alone can increase AOL’s price estimate by 15%.Notes:
- 100 Million Thank-Yous to HuffPosters Around the World, September 15 2014 [↩]
- The Biggest Facebook Publishers of October 2014, Meet The Newcomers: The Biggest Facebook Publishers Of November 2014 [↩]
- Meet The Newcomers: The Biggest Facebook Publishers Of November 2014 [↩]
- Huffington Post Now Makes $100s Of Millions Of Revenue, Putting Early Skeptics In Their Place, December 4 2014 [↩]
- Vox Media raises $46.5 million for valuation of $380M, December 1 2014 [↩]
- Buzzfeed passes $100 M. in revenue for 2014, November 25 2014 [↩]
- Vice Lands 2nd Investment, to Fuel Expansion, September 4 2014 [↩]