Newsweek: Has Arianna Huffington figured out the future?

By Daniel Lyons

If you had to declare a winner among Internet media companies today, the victor easily would be Arianna Huffington. Her site, The Huffington Post, attracted 24.3 million unique visitors last month, five times as much traffic as many new-media rivals, more than The Washington Post and USA Today, and nearly as many as The New York Times. HuffPo’s revenue this year will be about $30 -million—peanuts compared with the old-media dinosaurs, but way better than most digital competitors. And HuffPo has finally started to eke out a profit.

Those numbers, however, don’t fully convey the site’s place in this new-media world. What began five years ago as a spot for Huffington and her lefty celebrity friends to vent about the Bush administration has become one of the most important news sites on the Web, covering politics, sports, entertainment, business—along with plenty of tabloidy stuff to drive clicks, like photos of “Jennifer Aniston’s topless perfume ad.” HuffPo’s mission, Huffington says, is “to provide a platform for a really important national conversation.”

It’s a humid July afternoon in New York—Huffington’s 60th birthday—and she’s sipping San Pellegrino water and nibbling on apple slices in her tiny office on the third floor of a building in New York’s SoHo. Minions rush in and out, bringing chocolates, messages, and a BlackBerry, with her ex-husband, former Republican congressman Michael Huffington, on the line. Arianna has just come from speaking at an advertising conference—she gives more than 100 speeches a year, addressing techies and publishing types, who view her as the patron saint of new media, the queen of bloggers, the one person who’s figured out the future of journalism.

But a closer look at HuffPo’s financials shows just how tough that future is turning out to be. HuffPo has a big audience, but like most Web sites, it can’t monetize it very well. Right now, HuffPo generates just over $1 per reader per year. That’s nothing compared with the mainstream-media outlets that HuffPo hopes to displace. Cable-TV networks and print newspapers collect hundreds of dollars per year from each subscriber, and then generate hundreds of millions in ad revenue on top of that. The comparison isn’t perfect—TV and newspapers have higher fixed costs than Web sites—but it gives you a sense of how radically things are changing.

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