July 18, 2006

"Why [HuffPo] needs $5 million in outside capital to fulfill its vision is another question."

Private Equity Week reports:
Meta blog Huffington Post, launched by talking head Ariana Huffington, is aiming to raise $5 million in venture capital-its first institutional funding round, PE Week has learned.

Huffington Post co-founder and former America Online executive Ken Lerer declined to comment on the funding, but a knowledgable source says the company has been talking to VCs and hopes to close the round by the end of summer.

HuffPo, as it is affectionately known, enjoys more than 1.3 million unique visitors monthly, according to Nielsen/Netratings. This despite the fact that most of the Hollywood stars and political heavyweights who promised to blog for Huffington stopped showing up several months after the site launched....

Why it needs $5 million in outside capital to fulfill its vision is another question. Clearly, its founders aren't hurting for money. Moreover, two weeks ago, Huffington inked an agreement with IAC/Interactive Corp., in which IAC's Advertising Solutions sales group will exclusively sell advertising for the site. Malik, who has a similar agreement with ad sales startup Federated Media, says such deals "let people focus on content and not worry about the ad stuff."

Huffington's efforts to raise outside capital may suggest that it plans to sell itself to a larger media property down the road. At least one other political blogger says he has no interest in VC because he wants to remain independent. Markos Moulitsas, founder of left-leaning political blog Daily Kos, says: "For me, outside investment is not necessary and it would make little sense for me to jeopardize the site's independence for a little more cash." He says his site is "extremely successful financially," thanks to advertisements, including one featured last week from Working America, a community affiliate of the AFL-CIO.
Yeah, I don't get it. Any ideas?

And 1.3 million visitors a month? That's not too good for them! It's half of Instapundit's traffic. And Kos... Kos has more than 10 times that. So I guess he could raise $50 million.

62 comments:

Robert said...

A lot of Kos' traffic is illusory. (To his credit, he doesn't go around talking about how he gets a million visitors a day, either.) 10,000 people who hit refresh 10 times a day, versus 100,000 people who visit once a day - same traffic figures.

Kos has a lot of refresh-obsessives. (And there's nothing wrong with that - those repeat eyeballs are worth something to advertisers, because it takes 7 to 10 impressions for an ad to really get someone's attention.)

Internet Ronin said...

Arianna needs a new Pious, I mean Prius, I guess.

The Drill SGT said...

Clearly, its founders aren't hurting for money.

I wonder why the writer assumes this?

HD_Wanderer said...

She was looking for $500,000 in May 2005. Apparently she's upped the ante.

Maxine Weiss said...

Both Kos and Huff harrass their commenters.

If you post so much as one comment on either of their sites....you are swarmed with all kinds of mailers.

To this day, I can't get rid of all the freebies, and incentives, spam etc.. that come to my email, just because I posted one message on the Kos site...years ago.

Kos pays readers for commenters. I have the offer letters and give-a-ways in my email to prove it.

I've tried dozens of times to unsubscribe to the HuffPost newsletter...

....to no avail.

It's like you're trapped in Huffland. Biggest mistake I ever maid posting on those sites..

...but other commenters are actually taking advantage of all the promos and freebies, which is exactly how he he gets so much traffic and commenters.

Ann, you need to start an email-ing campaign. ---Mailers, freebies and give-a-ways.

Peace, Maxine

Matt Drachenberg said...

"HuffPo, as it is affectionately known"

Affectionately isn't exactly the right term.

SteveR said...

Easy.. When you see a situation you can't understand, look for the financial motive. I have to assume the vision is to raise money for furthering some agenda(s) and the present reality isn't cutting it.

This all reminds me of the dot com boom/bust, people thinking they could get rich just by having a web site. What possibly could she need venture capital for? Vlogs and yellow offices?

SteveR said...

Lush accomodations at the Ruth Anne's "estrogen-fest"?

John said...

Why is it that the left has such a hard time cracking into the "ideas" communication market? First Air America, now HuffPo.

They spend an inordinate amount of time complaining about conservative talk radio and conservative blogs (even though most are NOT) rather than giving the public/market what they are seeking - fresh ideas, open forums, common ideals, etc.

For the so-called defenders of free speech, the left sure knows how to "capitalize" on it - or at least thinks they do!

John said...

BTW - When is Althouse going to seek some VC?

PatCA said...

Why? Because she can.

She's trying to be the next investment "bubble." If people will give her money, she will take it.

Freeman Hunt said...

Hire reporters? Do news? Maybe cameras and crews for vlogs at special events? Open satellite offices?

Even then, $5 million? That's a lot of venture capital for a website.

Mark the Pundit said...

They need $5 million to run that thing?

It makes Andrew Sullivan and his hundred-thousand dollar "bandwidth" fundraisers looks cheap.

I would support the $5 million or Greg Gutfeld, though. Because if he stops posting, there is no point in even going back to that site...

AJ Lynch said...

Just to clarify, the article said 1.3 milion "unique visitors". The Instapundit graph said visits. Are we talking apples to apples?

As to the PE and the $5MM, dahling Arianna is just hedging her Huffpo bet by selling a stake in the blog and thus taking some of her chips off the table. It happens every day in the PE world. Arianna can probably keep a million or so, and the rest gets plowed back into that fancy-looking Huffpo blog.

Seven Machos said...

If this is all linear and proportionate, I bet Ann Althouse could raise a cool $80,000. I bet I could raise a couple hundred.

Ben Masel said...

Maxine Weiss said...If you post so much as one comment on either of their sites....you are swarmed with all kinds of mailers.

To this day, I can't get rid of all the freebies, and incentives, spam etc.. that come to my email, just because I posted one message on the Kos site...years ago.


Garbage. I'm a quite prolific commenter on kos, and it just hasn't happened.

John Jenkins said...

Ben, maybe you just have a better spam filter than he does. VC isn't looking for safe, sound investments, or even small, steady returns. It's looking for potential home runs. That's the problem I would expect Huffington to face: there's not really any home run potential there from a money-making standpoint.

Freeman Hunt said...

Just to clarify, the article said 1.3 milion "unique visitors". The Instapundit graph said visits. Are we talking apples to apples?

Maybe.

On sitemeter, "visits" means unique visitors who haven't left for more than 30 minutes. So, if you leave and come back two hours later, it's two visits. If you leave and come back within 15 minutes, it's one visit.

I don't know how HuffPo counts "unique visitors." Could be similar, could be different.

Nasty, Brutish & Short said...

NBS would like to announce that we need ONLY $4 million in venture capital funding/

Email us.

Ann Althouse said...

$80,000? If it's proportionate, I get over $1 million!

As to what "unique visitors" means, why on earth would HuffPo use a more restrictive definition than Site Meter, which is the industry standard?

SippicanCottage said...
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Seven Machos said...

I meant no disrespect. I was pulling numbers out of my ass. A lot like Arianna Huffington...

XWL said...

Does any one visiting a Soros type site have any confidence in the opinions expressed there? I don't. People are on payrolls, and get money funneled to them in ways that are not transparent.

Those that visit and drink deep and swallow from the Soros type site cup, have more than confidence, they have faith, that the views expressed on those sites are the only 'reality-based' views available.

(that CNN, bunch of right-wingers, NYT, in the pocket of the Bush (sorry, Boooosh) Administration (oops again, meant Regime) that's reality for you)

Don't tell them that their facts and views resemble a twisted sort of belief and faith though, they aren't all screwed up like those evil evangelical fundanutters, afterall.

Plus, I'm pretty sure I can do what HuffPo does for a fraction of the cost (I'll accept a paltry $250k per year to switch sides and point out all the eeeevil committed by conservatives).

The Mechanical Eye said...

Kinda makes you wonder how things are going down over in Pajamas Media.

knoxgirl said...

Air America can't draw listeners and pays insane salaries anyway, has no shot at making money and never goes away. Someone writes a fat check and it keeps on the amen chorus.

Yeah, I've been totally flummoxed over Air America for a long time now. How the hell do they keep going? Fat checks from some anon source sure seems to be the only answer...

and I don't think I've been to Pajamas Media since their "grand opening"... I won't go back AT LEAST until they fix that logo...

knoxgirl said...

also, I really hate the moniker "HuffPo." It sets my teeth on edge

knoxgirl said...

nice post, xwl.

By the way, to be stylistically consistent, you really should call it the "HuffPooooooooo". I like that better anyway.

SippicanCottage said...
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SippicanCottage said...
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Seneca the Younger said...

As to what "unique visitors" means, why on earth would HuffPo use a more restrictive definition than Site Meter, which is the industry standard?

Why assume they're using a more restrictive model.

Semanticleo said...

Ann;

Your traffic is less than half of Arianna's so you could earn.......?
Are you for sale?

kmg4 said...

Huffington is a crook. Just look at her, it tells all.

No wonder leftists like her are so miserable. They think the world should bow down to them, and are frustrated when it does not.

Robert said...

Heck, I get 5% of their traffic on my news site...I wonder if I'd sell out for $250G.

Another Old Navy Chief said...

Shucks, I'd settle for a dollar two ninety-five or so...

wv: whufzrj - what ze raj said...

brylin said...

Isn't it the Puffington Host?

TR said...

What a concept... a bunch of liberals getting paid huge sums of money to pat each other on the back. It's been around for quite some time. It's called "Hollywood".

M. Simon said...

PuffHo

M. Simon said...

SippicanCottage,

World Net Daily has a similar model and seems to be doing OK

SippicanCottage said...
This comment has been removed by the author.
JackTanner said...

'This despite the fact that most of the Hollywood stars and political heavyweights who promised to blog for Huffington stopped showing up several months after the site launched....'

I think you mean in part because Hollywood stars and political heavyweights stopped showing up

Der Hahn said...

Just thinking outloud....take VC funds, sell ad space at cut-rate prices to friendly political campaigns and pay writers, who just happen to also be campaign consultants/staffers, above market rates for glorified press releases favorable to your ad-buyers.

Wash. Rinse. Repeat and get around all those pesky campaign finance rules because you're just running a website (or a radio network).

TallDave said...

One word that have VC eyes shining with greed: MySpace.

Three words they will learn, to their pain: Ain't gonna happen.

Anyone who throws $5 mil at this will get exactly the return they deserve. And Arianna Lay, er, Huffington will be laughing all th way to the bank.

David said...

Speaking of visions and VC, How about a v-log of althouse 24/7? It could be a stream of consciousness thing as she goes about her daily routine.

Product placement alone would bring in beau-coup bucks. A good tag line would be "What the smart money buys!"

Mr. Snitch said...

Why all the fuss over this money? She has a number of paid staff, and it had been coming out of her (and her partners', I suppose) pocket(s). Kos' contributors aren't paid, and Glenn writes his site as sort of a hobby.

The site does have ads, but who knows whether that covers all the costs. Maybe the original investors were told they'd start getting paid back by now. Huffington also remarked in an interview that she needed to start showing a profit at some point, otherwise the IRS would no longer let her deduct expenses (her site would be seen as a hobby). By using money raised this way to cover some expenses, perhaps her advertising income can be made to look like profit, alleviating her IRS problems.

Why $5 million, and not $500,000? Probably because you don't want to be running fundraisers constantly. (It leads to too much idle speculation and bad publicity - as this post exemplifies.) Better to raise a larger sum, and be done with it for a while.

So $5 mil sounds like a lot to run a website? How much did PJ media raise? (And most of their writing is from unpaid bloggers.)

I don't care for Hufington's site or politics either. But I understand the desire to try and remain solvent while running a business.

Steve H. said...

The burning question, STILL, is "Why did Pajamas Media need seven million dollars to start a group blog?" Everyone else does it for ten dollars a month, or they do it for nothing at Blogspot.

The more amazing question is, "How did Pajamas Media find a way to blow their ridiculous stores of capital fast enough to cause internal panic and turmoil?" What the hell are they spending it on? They do absolutely nothing, as far as anyone can tell. In nine months, not one of their nutty promises has materialized.

HuffPo's traffic figures are way below the abysmal-failure threshold. Any female blogger who link-whores and shows her boobs once a week can do better. Only a moron or a True Believer would give them a dime, now that there is no doubt that HuffPo is a flop.

Why is it taking these proven failures so long to die? Venture capitalists must be as gullible as lemmings.

Uncle Aubrey, if you're listening, I'm still willing to open a lemonade stand for nine million and change. And I promise to lose your money WAY slower than Pajamas Media. You can't beat a deal like that.

Michael said...

I just unsubscribed from Huff'N'Puff's email newsletter to see if it actually works.

I will miss the humor, though if it does.

Ann Althouse said...

Mr. Snitch: They are seeking venture capitalists, not patrons! How do the investors make money?

Mr. Snitch said...

Yes Ann, I understand this is venture capital and not patrons. If the investors don't see a means to make money, they won't invest.

Wait, let me rephrase that: If the investors don't see something in it for them, they won't invest. Investors have all kinds of reasons for investing, and sometimes making a profit is just a pretext. Look at investors in Broadway plays, for example. Profits in such ventures are rare. Most restaurants go under, as well, but here in Manhattan they open and close like revolving doors. Retail businesses? Most fail inside a year. Most books don't sell, most movies are forgotten, few documentaries get noticed... I could go on and on re the precarious nature of most business ventures.

If the question is: How will HuffPo make investors money, my answer is, "it won't". (Neither will Pajamas Media, most likely.) But you're assuming that this means investors won't invest, and that's not necessarily so. Some iinvestors may want to ally themselves with a particular ideology, or rub elbows with the Hollywood stars the site supposedly attracts.

Some investors may mistake a HuffPo for a Google (in terms of a business they don't understand, which makes money anyway). Don't underestimate this factor. Check out this month's WIRED, in which Rupert Murdock is lauded for his 'astute' purchase of MySpace. Does Fox make money off the site (after the purchase price and upgrade costs)? Hell, no! Does Murdock know how he WILL make money off it? Uh, he's mulling that one over. But the site's community is bigger than ever, and therefore the investment was a 'good' one. The assumption is that someday, someway, the economics of the thing will become clear. (Who cares that MySpace could become the next Friendster if readers bolt for the next shiny new thing?)

HuffPo has every right to make the best possible case for itself, and to seek outside investment. Investors have the right to seek better opportunities, and would be prudent to do so. But it's not MY money.

chuckR said...

If you call a patron a VC, does that make the patron a VC? Is this a way to get around a future constraint on political speech ala McCain-Feingold?

SteveR said...

ChuckR Bingo!

Al Franken gets an out of the ballpark "salary" but isn't it really just a diguised campaign contribution?

Ann Althouse said...

How does McCain-Feingold cover this? You're talking about the press, not contributions to candidates. Anyone can use their own money to start a newspaper and to run it at a loss and spout political opinions.

Bill Dalasio said...

I think Ann hit on the $5 million question. Politics aside, though, I'd love to see the business plan the HuffnPuff is forwarding to the VCs. If they have any idea of an arms-length transaction, I'm guessing the document is being kept around for entertainment purposes (no doubt beating anything on the sight.)

Mr. Snitch said...

Chuck R makes an interesting point. And what if my indirect contribution to a candidate consisted of a newsletter that employed a key campaign staffer as a sort of 'no-show' job (the staffer might show up, but (s)he really was doing work for a campaign)? Further, what if that paper took its editorial lead from the candidate's campaign?

Such a scheme would certainly smell bad, but wouldn't it also skirt many laws regarding campaign contributions? No money is going directly to the campaign, yet I am underwriting a key staffer and producing 'unofficial' campaign communications.

chuckR said...

I didn't mean that McCain Feingold covered this (God I hope not), but rather that if it is an allowable constraint on political speech (so far it is), couldn't there be another law passed to cover internet-based political free speech? If a blog has a business model that aligns it more closely with media - which are ostensibly in the P&L business - could this give them cover? How much differnce is there between a vlog/pod-cast and Franken's maunderings?

Ann Althouse said...

ChuckR: If the First Amendment doesn't protect us bloggers, it's not worth a damn.

knoxgirl said...

Sippican, I should have clarified: I avoid PJMedia simply because I don't trust that it's worth reading; I was pretty disappointed in their product at the beginning. I read Glenn Reynolds all the time and I believe he does great editing and publishes the best links... but when he sends me to PJM, I have to question his motivations, so I don't go. There's simply too much I know I want to read as it is, and just don't have time. My intention wasn't to lump them in with HuffPoo, moneybags-wise...

Jake said...

According to Alexa, huffingtonpost beats instapundit by about 4:1.

http://www.alexa.com/data/details/traffic_details?&compare_sites=huffingtonpost.com&y=p&q=&size=medium&range=6m&url=instapundit.com

And it actually beats kos by a smidge:

http://www.alexa.com/data/details/traffic_details?&compare_sites=dailykos.com&y=p&q=&size=medium&range=6m&url=huffingtonpost.com

Adam said...

A few notes:

1. Maxine, I know for sure that DailyKos.com does not, ever, sell its member's email addresses or spam people. Ever. You are getting spammed for some other reasons.

2. On campaign finance law: there is no issue. A website, even if incorporated, that engages in news, opinion and commentary about political issues is exempt from campaign finance law, just as it would be in print or on radio -- so long as it is not owned or controlled by a campaign, party or PAC. The FEC has even gone so far, for example, to say that a radio show could let Bob Dornan be a guest host simultaneous with his running for office without raising any legal question.

Charles Giacometti said...

The even funnier comparison in terms of traffic is HuffingtonPost versus Pajamas Media. HuffingtonPost beats it by about 8-1 on most days, some days by a lot more.

http://www.alexa.com/data/details/traffic_details?&range=6m&size=large&compare_sites=huffingtonpost.com&y=p&url=pajamasmedia.com

If I were the original investors in Pajamas Media, I would not be very pleased seeing a bootstrapped site beat a VC-funded site by such an impressive margin.

SippicanCottage said...
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Bill Dalasio said...

I took the liberty of running a couple of basic calculations. If we assume fairly standard venture capital valuation methodolgies and fairly standard discount rates for the industry (40%), we'd have to assume that Ms. Huffington would have to be able to sell her blog for almost $27 million in 5 years to justify the infusion she's asking for. That's assuming the VC firm gets 100% ownership. If we use a more generous 30% discount rate, she'd have to be able to sell it for $18.5 million. If this isn't a McCain-Feingold dodge, someone is getting robbed.

Robert said...
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