AOL’s 2011 purchase of the Huffington Post baffled many who found the price expensive. Now, more than two-and-a-half years later, we have access to the optimistic growth forecasts that underpinned this eye-watering valuation, thanks to internal board documents unearthed by the Smoking Gun.
By way of comparison, Amazon founder Jeff Bezos paid $250 million to buy the Washington Post earlier this year. The board documents make it clear that AOL’s investment was based on expectations that HuffPo would follow a pretty amazing growth trajectory in terms of revenues and profits, while expanding its profit margins and maintaining its traffic.
The forecasts were prepared for the AOL board by Bank of America Merrill Lynch, using the companies’ own inputs, the document says. Over the four years following the acquisition, it was predicted that HuffPo would grow its profits from less than $1 million to $73.2 million by 2015.
Unfortunately, we can’t cross-check whether these assumptions became reality; AOL does not break out HuffPo in its quarterly earnings or annual reports. The title is contained in the company’s Brand Group, which includes other websites such as TechCrunch and Aol.com.
The Brand Group as a whole generated a profit of $53.5 million and total revenue of $730.2 million—implying profit margins of less than 10%. HuffPo, however was expected to expand its profit margins dramatically, from zero to more than 30% by 2015.
In terms of traffic, HuffPo was predicted to draw 83 million unique visitors by December 2013, as measured by Google analytics. These figures are not directly comparable, but HuffPo’s own website says it had 46 million monthly unique visitors as of December last year, citing Comscore.