NEW YORK ( Trefis ) -- The New York Times Company ( NYT) traditionally competes with large companies like News Corp ( NWS), Yahoo! ( YHOO), Google ( GOOG), Microsoft ( MSFT) and AOL ( AOL) in the online advertising market, but also has started to face competition from smaller players that include news aggregator and blog sites like the Huffington Post.

The Huffington Post, which started its business in 2005, has grown to 26 million unique monthly visitors, compared to an estimated 30 million average monthly unique visitors for NYT online in 2010. This indicates that a much newer player like Huffington Post could soon overtake NYT in terms of unique visitors, which means that increasing competition could threaten NYT online business growth.

We estimate that NYT's online advertising business constitutes around 20% of the $8.46 Trefis price estimate for NYT stock, which is about 14% less than the current market price.

The Huffington Post is benefiting from the increasing use of social media where online readers can share news, post comments and contribute to blogs. This is personalizing the way people consume news and so aggregator sites like Huffington Post are growing traffic rapidly. The Huffington Post aggregates about 300 stories from other publications and publishes a similar number of original stories and original blog posts.

According to MediaMorph as quoted by Bloomberg, the Huffington Post is worth between $300 to $450 million. This valuation is driven by impressive growth as the company plans for its sales to grow from $30 million in 2010 to $100 million by 2012, a whopping 82% compounded growth rate over 2 years.

We estimate that the New York Times is worth around $1.2 billion overall after accounting for its net debt. Its online advertising business from the New York Times and International Herald Tribute online segments total about $380 million by our estimates. If we rely on the $300 to $450 provided by Bloomberg, then Huffington Post could be worth more than NYT's online business as a standalone business today. Assuming its growth continues to impress, it will likely outpace NYT online going forward.

To stymie this competition, NYT online has started to tap in to the new growth formulas of targeting mobile internet and social media to drive traffic and enrich the reader's experience, but we believe the company still has needs to find innovative ways to position and share its premium content so that visitors will visit NYT online. We wrote recently that mobile internet and social media could help drive NYT's online business, and stock, higher -- but this will not be easy given the rapid ascent of newer sites like Huffington Post. (See New York Times Online Can Add +25% to NYT Value )

We currently expect NYT's average monthly unique visitors to increase from around 30 million in 2010 to around 42 million by 2013. However, there could be upside of around 5% if it can grow this traffic to 50 million uniques by the end of 2013.

You can see the complete $8.46 Trefis Price estimate for NYT here.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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