MEDIA AND MARKETING:Newspapers cannot compete with US website's race to the bottom approach

AOL’s decision to buy American online newspaper the Huffington Post for $315 million has sharply divided opinion on the future of online news. Has AOL made yet another ill-judged investment, just like the company did when it paid $850 million for social networking site Bebo, or is it making the right bet that the future of news is on a screen and not on paper?

Founded by socialite Arianna Huffington, in six years, HuffPo came from nowhere to become one of the most read news websites in the US. While it employs over 100 journalists to write and aggregate or summarise the news, much of its content was provided free by thousands of unpaid bloggers and columnists.

Tim Rutten of the Los Angeles Times describes HuffPo's business model as a "galley rowed by slaves and commanded by pirates".

The website attracts 28 million viewers, but its revenues are relatively meagre, estimated at under $60 million. Many of those readers land on the website via search engines and HuffPo is renowned for its canny search engine optimisation (SEO).

In a back-handed compliment, Slate columnist Jack Shafer observed: “Huffington glories in carving the meat out of a competitor’s story, throwing a search-engine optimised headline on it and posting it. Old media types tend to cringe if a headline oversells a story or a story is trumped up solely to grab eyeballs. Huffington suffers no such shame. There is no celebrity slide show beneath her tastes and no SEO trick she won’t employ if it will get her traffic.

“Thanks to Huffington, all self-respecting journalists, especially those who fear for their jobs, have abandoned those anxieties and are happy to chase Arianna’s SEO Speedwagon wherever it may go . . . Aping her, they’ll happily publish more copy daily than any human would want to read in a week or a month, as long as it harvests page views.”

However, no matter where they come from, eyeballs are eyeballs and they attract advertising dollars. Financial Timescolumnist John Gapper believes news aggregation sites like the Huffington Post, which build audiences through a lowest common denominator approach, will inevitably squeeze out less nimble old media rivals.

In Gapper’s view, internet properties that occupy the middle ground like general newspapers are being squeezed aside by technology. “They are being replaced by a combination of cheap mass products and expensive elite ones,” he says.

While specialist content providers like the FTand Wall Street Journalare moving upmarket where they can charge for online output, free news aggregators like HuffPo are racing downwards to grab page views.

In Ireland, two free aggregator sites launched last year: the Journal, funded by the Fallon brothers who also own the property website Daft.ie, and Newswhip, which was founded by former lawyer Paul Quigley.

Quigley believes that making general news content free can be a sustainable business model. “What people want is a source they can trust and that they like the tone of. Younger people haven’t developed the same kind of media consuming habits as older people. Seventy thousand unique users have looked at Newswhip in the past month. As long as we have a dedicated readership which is about the circulation of a small newspaper, I think we can do okay.”

Quigley has not got any ads on the site so far, but says his strategy was to build some traffic before he pitched for ads. He has outsourced the task of selling ad space to an external sales agency.

While HuffPo has burned through a ton of cash, Quigley has funded the business to date, but is not ruling out the possibility of raising external funds.

Quigley’s advantage is that he hasn’t approached the venture with old media baggage.

Mathew Ingram, a columnist on the GigaOm website, argues that newspapers and other media outlets have proved incapable of emulating the Huffington Post because it is almost impossible for a company with an established business in one market to transition to a different market – particularly one that disrupts or cannibalises its existing business.

According to Ingram: “Newspapers have been caught in a trap. Every bit of growth online comes at the expense of the printed product. For companies that have grown used to controlling the platform and distribution of content for so long, the web is fundamentally a threat rather than an opportunity. Arianna Huffington had nothing to lose and everything to gain – and gain it she did.”

siobhan@businessplus.ie