The news that AOL paid $315 million for Huffington Post has to provoke some eyerolls. According to AOL’s own Finance Daily, HuffPo claims 25 million unique monthly visitors. This alleged fact permits every Internet operator in the world to estimate the sell-out value of their own site and, as a strictly business calculation, it’s very difficult to see how the AOL/HuffPo deal makes sense.
Think of it this way: What kind of online news operation could you run for $1 million a year? Well, if you figure your staff’s average salary somewhere in the neighborhood of $75,000 — a fat number, really — then you could have a staff of 10, plus a quarter-million bucks to spare for all other expenses, including promotion.
OK, then: What’s to stop any AOL rival from plunking down $3 million a year to launch a HuffPo competitor with a staff of 30 and an expense budget of $750,000?
The relaitve ease and cheapness with which such online operations can be launched argues against a company investing a much larger amount in any single Internet property and raises a question asked by Stephen Green of Pajamas Media: “Where did AOL come up with $315 million?”