The new digital media universe just shifted on its axis, again.
In a move that surprised Wall Street and stunned media executives, a small privately held company called Design Observer Group agreed to acquire the newly created Huffington Post Media Group, in an all-cash deal worth an estimated $68 million, according to people close to the negotiations.
The acquisition, which still faces anti-trust scrutiny, brings together a little-known media conglomerate based in rural Connecticut, known as DOG, which focuses on a niche audience of design aficionados with the recently merged powerhouse combination of Huffington Post and AOL.
This deal follows closely on the heels of the announcement in February that struggling AOL would buy Huffington, one of the most heavily visited news websites in the country, for $315 million, $300 million of it in cash and the rest in stock. That news realigned the evolving world of digital media and how companies that are moving beyond the “dead tree” branch of print media deliver news and commentary via new technology.
Details of the DOG tie-up with Huffington were not disclosed. But the people close to the deal say DOG, advised by a consortium of leading investment banks, is sourcing the acquisition from leveraged hedge fund transactions. Still, commented R. J. Gopalakrishnan of Global Dominion Capital, a financial advisory company in Mumbai, “This is stunning. Who would have thought that a design blog could wield so much clout?”
Indeed, Wall Street was largely kept in the dark about details of DOG’s finances and why Huffington would agree to be acquired for an amount substantially lower than what AOL had paid. The deal was announced at midnight after days of talks that almost hit a snag over a DOG demand concerning compensation for writers.
A DOG spokesperson, speaking on condition of anonymity because he did not want to compromise the deal, said an additional $40 million would be set aside by DOG in a nonprofit foundation to pay writers and bloggers and to finance an education fund for their children. Since the AOL/Huffington Post deal, a group of Huffington bloggers has gone on strike to protest lack of payment for their work, a situation that DOG executives were determined to avoid.
“We highly value the creative input of our writers and want to reward them for their services,” the DOG spokesperson said. “You don’t have to a commodities trader to be paid your fair share,” he added.
DOG was founded in 2003 by four prominent members of the international design community: Michael Bierut, a partner in the New York office of Pentagram; the British deisgn critic and author Rick Poynor; and William Drenttel and Jessica Helfand, principals of the design studio Winterhouse, where DOG is currently based. Since then it has grown to include sister sites on urban and landscape design (Places) and what is known as design for social innovation (Change Observer). Run from a remote location in northwestern Connecticut, DOG regularly attracts one million viewers per month.
To be sure, DOG is a tiny operation compared to Huffington Post, which now draws some 25 million monthly viewers. It started in 2005 on a $1 million investment, mainly from Arianna Huffington, the cable talk show pundit and liberal doyenne, who grew the site mainly by aggregating content but later added many prominent writers and journalists to the payroll who regularly contribute original content. AOL, for its part, has been trying to bring in additional revenue to its content sites, many of which have been shuttered or merged with Huffington since their deal was closed.
Further consolidation can’t be ruled out as the sites come under the DOG umbrella, according to officials. Moreover, it is believed that the new owners will attempt to infuse the existing blogs with a sharper design slant — from heavy hitting original content to snazzier graphics and more interactive features that engage the viewer on many levels and provide a total design experience. “Design has been ignored for too long,” Drenttel points out. “The time has come to bring it back into the media equation.” It’s not clear who will assume editorial authority for the new company, or what role will be played by Ms. Huffington, who could not be reached for comment for this article.