AOL continues its strange trajectory

In January 2000 the internet service provider AOL announced that it was buying the 'old media' giant Time Warner for $164 billion.

The honeymoon didn't last - two months later the American Nasdaq stock exchange reached its high point and started to drop. The period became known as the end of the dot-com bubble, wiping out many of the internet companies that had sprung up in the previous five years.

AOL survived but it wasn't the same afterwards. It still operates as an ISP in the US, but it sold off its British internet business to Talk Talk, and now operates here solely as a 'content' company, providing things for people to read and watch online.

Today the American 'news' website the Huffington Post announced that AOL was buying it for $315 million. It's not on the same scale as the Time Warner deal, but it's very interesting.

The Huffington Post is largely a 'content aggregator' which means it thrives on quick-hit web traffic. The idea is to have as many articles available as possible, so that people searching for related articles online will stumble across them.

It's a similar strategy to the one AOL has been following for the past couple of years, as it turns itself into a 'content' company rather than an internet provider.

Interestingly, a fascinating New Yorker profile of the CEO Tim Armstrong (unfortunately you need a subscription to read the full story) says that the company still makes 40 per cent of its revenues (which account for 80 per cent of profits) from its old dial-up internet business.

Armstrong comes across very much as an old-style salesman, forbidding his staff from 'loser talk':

Don't allow it in your corporation. Talk about winning. Talk about how you're moving things along.

AOL has been on a spending spree recently - at the end of 2010 it bought the business website Techcrunch, which today broke ranks with its new colleagues to publish Armstrong's memo to staff on the Huffington Post deal. One enlightening passage of business-speak nonsense runs:

The Huffington Post is core to our strategy and our 80:80:80 focus - 80% of domestic spending is done by women, 80% of commerce happens locally and 80% of considered purchases are driven by influencers. The influencer part of the strategy is important and will be potent.

One Metafilter commenter points out that 0.8 cubed is 0.512, or in other words that 80 per cent of 80 per cent of 80 per cent is actually 51 per cent.

Perhaps the most interesting AOL-related document of the last few days is The AOL Way, the document it's sending around its editors at the moment, and which describes how it wants to increase the number of stories it publishes each month, increase views per story and more.

AOL already owns Patch, a network of websites that provide specialised local news to communities across the US, but Patch doesn't pay particularly well and its editors tend not to have the chops of the local newspapers it's hoping to replace.

The other end of the aggregator business involves companies such as Demand Media, which track what people are searching for, find out whether articles exist for those queries and, if not, write about them. The problem is that a lot of the work that results tends to be lowest-common-denominator stuff that gets the hits from the search engines but doesn't leave the reader any the wiser after reading the story.

Can AOL make big money out of words and pictures on the internet without falling into that trap? It's certainly making the right noises.

UPDATE: The Guardian finds out about the Huffington Post's ownership and takes a look at where AOL's $315 million will be going.