Arianna Huffington Stays at AOL as Verizon Signals It Wants Content

NEW YORK ( TheStreet) -- Arianna Huffington has secured a four-year contract to retain her numerous positions, including editor-in-chief of Huffington Post, a move that apparently resolves concerns she had about Verizon's (VZ) pending acquisition of AOL (AOL), Huffington Post's parent company.

Huffington was concerned that the deal would jeopardize her plans to expand original reporting and video programming.

"After all my meetings and conversations with (AOL CEO) Tim (Armstrong) and the Verizon leadership, I am convinced that we will have both the editorial independence and the additional resources that will allow HuffPost to lead the global media platform shift to mobile and video," Huffington wrote in a memo, according to media reports.

Huffington had let her previous contract expire as she questioned Verizon's intentions. The renewed contract indicates that Verizon is eager to invest in the Huffington Post to boost advertising.

On Friday, shares of Verizon were down 25 cents to $47.52, cutting their advance this year to 1.6%.

In May, Verizon said it agreed to buy AOL for $4.4 billion in cash, or $50 a share, to tap into a crowded online-video marketplace and to use AOL's ad technology.

Extending Huffington's contract comes as AOL has been accelerating its push into digital advertising, the impetus behind Verizon's purchase of the New York-based company. AOL is forming its own in-house creative agency focused on sponsored content in an effort to capitalize on new forms of advertising as Verizon seeks ways to better monetize its broadband network.

The move into sponsored or branded content also comes at a time when consumers are learning to be leary of the gray line between editorial and advertising content.

With its newly launched partnership with Georgia-Pacific toward a "large-scale, digital custom content campaign" for brands such as Angel Soft, Dixie, Quilted Northern and Vanity Fair, AOL joins publishers such as New York Times (NYT), Washington Post Co., Buzzfeed and Vox in abandoning more traditional online models for outside paid content.

Sponsored content, also called "native advertising," presents advertisements from clients in the form of an article or content that blends into the publication, disguising the advertising as from-the-publication information.

"There are lots of different point solutions in the market that help brands create, distribute or measure their content marketing efforts," said Brad Elders, general manager of AOL Content Studio, in an e-mail.

"Partner Studio by Aol simplifies this complexity by bringing to market the industry's first fully open, data and technology powered content marketing solution that ignites end-to-end brand storytelling," he added. "Leveraging AOL's editorial excellence and powered by ONE by AOL's technology stack."

Readers are less likely to block out or skim past sponsored content as they are doing with online advertising. About 47% of U.S. consumers use ad-blocking software to screen ads, while about 30% say they simply ignore them, according to a report this week from Reuters Institute for the Study of Journalism.

And yet as AOL increases sponsored content efforts, readers are saying they feel tricked when they realize that what they've read is not part of the publication's own editorial material. About one-third of consumers said they feel "deceived or disappointed," the Reuters' study says, while about 50% say don't like sponsored content but accept it as a business model. And more than 25% said native advertising makes them feel less positively about the news brand.

About 75% of publishers and media buyers have embraced sponsored-content models as 25% more consumers looked at sponsored article than display ad units, according to statistics from DigitalRelevance's Media Buyer's Guide to Sponsored Content. Although consumers say they don't like native advertising, native ads yielded an 18% higher lift in purchase intent than display ads and a 9% higher lift in brand affinity than banner ads.

Elders said AOL considers the complex online advertising landscape an "exciting challenge."

"We have to double down on storytelling and creating compelling, authentic content that resonates with viewers," Elders said. "And, according to a recent AOL study, 61% of people said that as long as the content is good, it's okay if it's sponsored. Custom, branded content -- and advertising overall -- is evolving."

For Arianna Huffington, if AOL's expanding investments in advertising strategy leave sufficient room for the aggregating Web site to also invest in more and original source of news, she'll accept it. At least for the next four years.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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