AOL to Buy Blog Site In Bid to Expand Reach
Friday, October 7, 2005
America Online Inc. yesterday agreed to buy Weblogs Inc., the publisher of 85 freelance online sites about cars, movies, parenting, travel and other subjects, the latest move by the Dulles-based Internet service to increase the size of its audience and profit from ads.
Officials of both companies declined to comment on the record about the price. A source familiar with the deal, who spoke on condition of anonymity because of the transaction's confidential terms, said that the base price was $15 million and that AOL could end up paying as much as $25 million if Weblogs hits every performance target in the future.
Weblogs' most popular site is Engadget, which covers technology and is ranked as the third most popular blog by the Technorati rating service. AOL officials said the blogs, written by individuals and with comments from other Internet users, will continue to be published at their existing Web addresses while also being integrated with other America Online content.
In making its third acquisition since August, the Dulles-based Internet service said it was seeking to offer segments of its subscriber base, which numbers more than 20 million, more detailed information about dozens of subjects, in addition to the programming it aims at larger audiences.
AOL earlier purchased Wildseed Ltd., a company that offers services for wireless devices, and Xdrive Inc., an online storage provider, as part of a strategy to branch out from its declining business of dial-up Internet subscribers.
AOL officials also said they will allow Weblogs to retain complete editorial control and independence, a factor that entrepreneur Jason McCabe Calacanis, a co-founder of the two-year-old company, said in an interview was important to him.
"What makes this work is unfiltered citizens' content," Calacanis said of Weblogs. "My key question to America Online was, 'Guys, you understand this is unfiltered and that is what makes this special?' Traditional media companies are nervous about comments or opinions without editing. You don't have that in this business. It is people talking to each other."
AOL executive vice president James P. Bankoff said in an interview that AOL would benefit by providing more advertisers and a bigger audience for Weblogs' content. He said it will take a hands-off approach to the editorial content on Weblogs, citing the way AOL has allowed Baltimore-based Advertising.com, which it acquired last year, to operate as an autonomous unit. He also said the acquisition would enable AOL to increase its audience and provide opportunities for advertisers interested in reaching niche markets online.
Analysts had mixed reactions to the announcement of the deal. B.L. Ochman, a corporate blog consultant and publisher of Whatsnextblog.com, said the deal could begin the process of making some blogs more mainstream.
"This is pretty exciting news," she said in an interview. "AOL has bought some well-known blogs and can make a big bang in the blogosphere. AOL has been dangling, not knowing what it was going to be, and they are trying to get hipper. If they play this well, they will be a big player in the blog space soon."
Nick Denton, publisher of Gawker.com, a rival blog publisher, criticized the transaction. "The whole point about blogs is that they're not part of big media," he wrote on his site. "Consolidation defeats the purpose. It's way too early. Like a decade too early."