The Huffington Post is now five years old.
In those five years, the site has gone from a tiny blog featuring posts from famous friends of founders Arianna Huffington and Ken Lerer to one of the largest independent news sites in the world.
In another five years, the Huffington Post will likely have blown past the few remaining news sites that are still bigger than it is--the New York Times and CNN, for example----and become the largest independent news site in the world.
Don't believe it? Let's go to the numbers.
Two-and-a-half years ago, according to Comscore, the Huffington Post was visited by 1.2 million uniques a month. That compared to 11.1 million at the main site of the New York Times, 5.8 million at the Washington Post, 2.8 million at the Wall Street Journal, and 2.6 million at the LA Times.
Now, again according to Comscore, Huffington Post has 12.3 million uniques, way ahead of the main sites for Wapo (green line), the WSJ (purple line), and the LAT, which have stagnated. The Huffington Post (red line) still lags the New York Times (blue line), but not by much--and not for long.
(The numbers from Compete show a bigger gap between HuffPo and the NYT, but the trend is the same. The numbers from Quantcast, meanwhile, show Huffpo already ahead of the NYT).
As those who work at the leapfrogged sites and the NYT will be quick to point out, of course, traffic is not the same as revenue. But traffic does lead to revenue. And here, too, the Huffington Post is coming of age.
The Huffington Post booked about $15 million of revenue last year. Sales boss Greg Coleman thinks the company can double revenue this year to $30 million and double it again next year, to $60 million. And from there, as long as the site's traffic keeps growing, it's just a hop, skip, and jump to $100+ million.
(Where is all this revenue coming from? In part, from new, brand-name advertisers. Among those that have recently bought campaigns, says a Huffington Post source, are Amex, IBM, GE, Johnson & Johnson, Mercedes, Chevrolet, HBO, AMC, Toyota, Paramount Pictures, Sony, AT&T, Coke, Pepsi, Google, Microsoft, Yahoo, CNN, Colgate, Bulgari, Ford, Discovery, and PBS. This is what hiring Yahoo's ex sales boss and 10 new reps so far this year gets you.)
Now, $100+ million is not the $1 billion or so of revenue of the New York Times. But most of the $1 billion or so of the New York Times revenue is going away (its paper-based ads and subscriptions). What will be left, eventually, when the NYT's paper-based distribution finally collapses, are the online revenues. And those, for now, are in the neighborhood of $150 million.
So, by the end of this year, Huffington Post should be bigger than the New York Times in terms of online traffic. By 2012, Huffington Post should have vastly more traffic than the New York Times. AND by 2012 Huffington Post could also be within spitting distance of the NYT in terms of online revenue.
And a few years after that?
It seems reasonable to think that Huffington Post could eventually just be bigger than the New York Times, online and offline.
But, but, but...!
"But Huffington Post isn't anywhere near as good as the New York Times!" the traditionalists will scream. The Huffington Post is a blog. The Huffington Post is an aggregator. The Huffington Post is written by ranting lefties padding around their bedrooms in their underwear!
Yes, to some extent, that's true. Some of the Huffington Post is a blog. Some of it is an aggregator. And some of it is written by ranting lefties, wherever they may be. But there are now 19 other content verticals on the Huffington Post in addition to politics, and politics contributes only about a quarter of the site's traffic. (Here's a recent snapshot of what people are reading on Huffington Post: Only a small portion of it is politics).
The New York Times, meanwhile, is, well, the New York Times. It's the paper of record! It's the paragon of quality journalism. It's...
Yes, for now.
For now, advertisers are willing to pay a lot more for New York Times inventory than they'll pay for Huffington Post inventory (2+ times). Over time, however, that may begin to change. Much of the New York Times's online advertising is sold in conjunction with the paper's print advertising, and it's hard to separate the value of the two. If the Huffington Post eventually builds vastly more inventory than the New York Times, moreover, the per-page revenue-per-thousand won't matter.
And before you invest a lot of time arguing about the relative quality of a New York Times page and a Huffington Post page, don't lose sight of what's really going on here.
The Huffington Post, like Gawker Media, TechCrunch, dozens of blog networks, the Drudge Report, and other next-generation media properties (including the one you're reading--I'm talking my own book), is what is known as a "disruptive technology."
Clayton Christensen's "Disruption" Strikes Again
Now, when most people think of disruptive technologies, they think of technologies that are immediately and obviously superior to the technologies they are rendering obsolete. But in the nomenclature of Clayton Christensen, the Harvard professor who first laid out the concept of disruption, immediately superior technologies actually aren't disruptive technologies. Those are called sustaining technologies. Those technologies will often be acquired or otherwise co-opted by the incumbent leaders (the New York Times, in this case) and used to make their product lines better.
Disruptive technologies, meanwhile, are emphatically NOT better than incumbent technologies--at least not at the beginning. Disruptive technologies are often worse than incumbent technologies. Their advantage--the reason people begin to adopt them--is that they're also simpler, cheaper, and more convenient.
The Huffington Post provides a simple service for its readers and contributors: It aggregates thousands of news sources into a single location, and it serves as a powerful distribution engine for thousands of content creators. It does this in a manner that strikes many as chaotic and messy (in addition to politically biased), But in a world with hundreds of thousands of sources, it's also necessary and effective (and, in the manner Huffpo does it, fun--don't underestimate the value of that). The Huffington Post is also free, which the paper-based version of the NYT isn't.
In Clay Christenson's words, the Huffington Post meets the needs of more than 10 million uniques not because it's "better" but because it's "good enough."
And, like other disruptive technologies, it's getting better all the time.
This, after all, is the typical pattern with disruptive technologies. The disruptor enters at the low end of the market, providing a simple service that is cheaper and more convenient than incumbent alternatives and "good enough." The low end of the market adopts the technology--and the incumbent players, which serve the profitable middle and high-end of the market--snigger and point out that their products are "better,"
But then the disruptor improves its product, the way the Huffington Post has improved its product for the last few years. And soon the disruptive product is useful to the middle of the market as well--and it's still simpler and more convenient. Soon, the incumbent player, under attack from below, is forced to migrate to the higher end of the market, seeking to preserve its huge profit margins. Eventually, the disruptor takes over the middle of the market, and the incumbent player collapses.
The other common feature of disruptive technologies, one that certainly is at play here, is that the new market they create is often much smaller (in terms of revenue and profit) than the one they disrupt. This is one reason incumbents like the New York Times resist embracing the disruptive technology--because they'd go broke if they did.
But just because the Huffington Post's model won't sustain the high salaries, pensions, and benefits of the 1,100 folks who still work in the NYT's newsroom, doesn't mean that it won't let the Huffington Post build a very nice business.
How nice?
Most likely, $100+ million in revenue and 30%+ profit margin within a few years.
As it grows, and as it seeks to improve its product, the Huffington Post will likely hire more and more of the folks that the New York Times can't afford to keep, so much of its potential profit will be reinvested. But over the long haul, there's no reason it can't enjoy profit margins that would have made even the last generation of newspaper barons happy.
Welcome To Adolescence
So, the Huffington Post is 5 years old. It's still an adolescent, so it's not surprising that it often looks and behaves like an adolescent (don't we all). But the Huffington Post is a huge, powerful, and rapidly growing adolescent, one that is maturing into one of the biggest and most powerful news sites in the world.
And thanks to attractive economics (those thousands of contributors seeking distribution don't cost much), the Huffington Post will be profitable this year. It also still has at least $15 million of the $25 million it raised last year in the bank. Over the next couple of years, the company will likely figure out how to put at least some of that money to good use.
And then it will probably go public.
And one day, we suspect, through a combination of the reduction in value of the old line newspaper businesses and the growth of its own value, the Huffington Post will be worth more than the New York Times.
Disclosure: Ken Lerer, Huffington Post co-founder, is an investor in Business Insider.
