Huffington Post’s CEO on Tina Brown, Advertising and an Eventual IPO

Over the last five years, The Huffington Post has grown into a property that attracts 25 million unique visitors a month, and whose 12-month revenue is expected to hit $30 million by year’s end.

The question is: what’s next? To get answers, I caught up with CEO Eric Hippeau, a former venture capitalist (and still a “special partner”) at SoftBank Capital, which has invested millions of dollars in The Huffington Post and will someday want a return on its capital.

Hippeau spoke about the outlet’s IPO prospects, its new focus on newsletters, and what he thinks of competitors like Tina Brown’s The Daily Beast. He also explained that unlike Digg, The Huffington Post will never dramatically redesign its site. Our edited conversation follows.

I’m wondering what it means that you recently started a newsletter devoted specifically to Capitol Hill.

The newsletter is purely a natural way for us to spread the news that we publish. It’s a daily email that reaches a very targeted audience in the D.C. area, so we can drill down into a certain stories in a more finite way.

Will we see other newsletters? Perhaps a Wall Street tip sheet?

We’re thinking of some other newsletters we might do. We’re literally working on that area now.

Would we ever see a paywall around that content or around anything else at The Huffington Post?

We don’t believe that paywalls in general are a good idea for online publishers. The Wall Street Journal is always cited as having a successful paywall and indeed it does. But it’s the exception. Most outlets that have tried to institute one have seen steep declines in their audience. We’ll never use them.

What about a partnership with Newsweek now that its talks with The Daily Beast are apparently off?

We have not met with Newsweek [and it isn’t] something we’d be particularly interested in.

You recently hired Howard Fineman, a 30-year veteran of Newsweek, to be your senior political reporter. How will such high-profile hires square with your 6,000 unpaid bloggers, who create content for the site?

We’re all about telling current event stories, using all the different tools at our disposal based on digital technology. We do use editors. We also have a reporting staff and a pundit staff, and Howard — who is very well-known and savvy — is sort of in between. All of that is just adding more experience, more heft to what is already a strong team. So we feel that it’s very consistent with what we’ve been doing.

A recent Newsweek story reported that The Huffington Post generates little more than $1 per reader per year. That’s not a lot, and as a place where many people come for their celebrity gossip, it must be challenge. It’s hard to sell contextual ads against Lindsay Lohan stories, as an article in yesterday’s Times observed.

We never think of revenues per reader per year. That’s not a number we track or find meaningful. We don’t charge our users, so as far as we’re concerned, the more people who find our content, and engage with it, the happier we are. We’re profitable with the 25 million unique (readers we have). If we’re so lucky to grow our audience, it isn’t going to make us unprofitable.

But is it fair to say that celebrity news is what’s most popular at the site, and is that a concern in terms increasing revenues?

We see [celebrity news] as a plus, not as an issue. The thing about digital technology is that you’re just one click away from the next story. There’s no need to have this separation between business news and sports news. We do group it into sections, as you know. But we publish about 600 items every day between the blogs and news items, and while we don’t expect people to want to read all those stories, we make it very easy for readers to go from one story to another.

What’s your bounce rate?

We don’t disclose that.

After celeb stuff, what content is viewed most at The Huffington Post?

Our media and comedy and sports [coverage]. We’re also very successful in green. We’ve made a very big commitment to covering the environment. We have a big audience in technology. And next week we’re launching a new section called “health.” We already have 23 coverage areas and we’re continuously thinking of new content areas to develop.

In terms of advertising, what’s working best for you? Banner ads? Sponsorships?

Banner ads work very well. If you go on front page right now, you’ll find a striking ad from Siemens, talking about (the company’s) capacity in high-speed rails. And that’s a CPM-based banner ad, of sorts.

We’re also increasingly engaging in social marketing with our brand partners. For instance, we’ve done a big campaign with IBM, helping the brand get closer to the flow of publishing and conversation so the company can engage more closely with the audience. (IBM has its) own bloggers, and we publish them under the moniker of “sponsor-generated content.” (That lets) readers recognize who is an IBM blogger. IBM also has a lot of very valuable content that it publishes at IBM.com, and we’ve published it with the same “sponsor-generated content” label.

Are you working with RapLeaf or other data mining companies to help you to get a better handle on your user demographics, etc.?

I’m not familiar with RapLeaf, but not really. We do surveys of our own, and obviously we keep track of our audience because we have to explain it to our advertisers. Some ad networks that work with us use cookies, but we ensure that the data that’s collected are in no way personal data. We’re very protective and conservative when it comes to that. For example, we allow people to comment anonymously. There’s just not a ton of personal data on our site.

Since you don’t really own your audience — you don’t make them log on, for example — is it harder to maintain your advantage over The Daily Beast and everyone else?

In business you have to be very vigilant. We have to make sure that we stay in the leadership position. But what we do is relatively complicated. We have a large and growing content team that’s adept at telling stories through a host of digital tools that over the last five years, we’ve learned by experience how to use.  We have a platform that makes consuming content very social – not only in the sense that people can engage and contribute but to also share content with their friends in a seamless fashion that people find to be very engaging.

What we’ve done isn’t easy to recreate. There are a lot of layers that we’ve been able to build and on which we’re continuously improving. And if you look at comScore, you’ll see that anyone you’d consider to be a competitor is not close in scale, and we’ll make sure we [keep our lead].

Gawker Media has obviously become a huge force in the digital media industry.

Gawker Media and HuffPost have both been able to attract large audiences by offering various types of content people want.  It’s why HuffPost has launched so many verticals.

Does it drive you mad that The Daily Beast is copying much of your formula?

We have an enormous amount of respect for Tina [Brown]. She’s someone who is good friends with Arianna, and I think she’s doing a great job, and I wish her all the best. It’s a growing business. It’s not a zero sum game. More people access and engage with news than ever before thanks to the digital ecosystem.

You’ve made two acquisitions this year: the political poll analysis company Pollster.com and Adaptive Semantics. Will we see more acquisitions over the next year?

Those two were made in very strategic areas for us. When you have 3.5 million people publishing comments [some months], all moderated, you have to have technology to do that. And Pollster’s ability to gather polling data and make sense of it is important to us. So in the future, as we develop our road map of things we need to do, if there are companies that can make a big contribution without us having to recreate what they are doing, we’ll definitely take a look at acquiring them.

Would you ever redesign the site?

Something changes on the site every day, and you as a user might not be aware of it. I think if I showed you how we look today and how we looked six months ago, the changes might be more obvious. But most changes aren’t that visible and that’s by design.

The Huffington Post has raised $37 million [from SoftBank Capital, Oak Investment Partners, and Greycroft Partners]. Is an eventual IPO the idea, and will you raise any more money to grow the business in the meantime?

We have a very strong balance sheet. We’re profitable and cash flow positive, with no plans at the moment to raise more money. We also have no plans to exit at the moment. We’re focused on building the business. But certainly, we’re planning the future of the company as if we were going to do an IPO.

What comps interest you most?

I don’t know if there’s a perfect comp, but you have to look at big Internet companies. It’s one set of data you have. Demand Media [a platform for specialized, freelance content that filed for an IPO in August] might be comparable as we learn more about their business, and certainly they are in the content business, so we’ll be interested to see how they do.

There’s been M&A, including Associated Content [acquired by Yahoo in May for $90 million]. They are private transactions, (so) do you don’t really know what the multiples are. But you can triangulate [to see what your business] might be worth.

If you were to sell, do you think the fact that The Huffington Post is so closely identified with Arianna could be an obstacle?

I can’t imagine someone more energetic and more dedicated to a business than Arianna. She’s passionate about what we do and full of great ideas. Having said that, we have a professional organization of seasoned executives in all areas, from editorial to technology to sales to administration, and we run the business professionally. Arianna is a very important member of our team – and we don’t anticipate a future without her. But it’s a business. [If she were to leave for whatever reason], it certainly would be a problem, but something that any professional organization should be able to manage.