HuffPo Hustles for Venture Dollars

Meta blog Huffington Post, launched by talking head Ariana Huffington, is aiming to raise $5 million in venture capital-its first institutional funding round, PE Week has learned.

Huffington Post co-founder and former America Online executive Ken Lerer declined to comment on the funding, but a knowledgable source says the company has been talking to VCs and hopes to close the round by the end of summer.

HuffPo, as it is affectionately known, enjoys more than 1.3 million unique visitors monthly, according to Nielsen/Netratings. This despite the fact that most of the Hollywood stars and political heavyweights who promised to blog for Huffington stopped showing up several months after the site launched.

Bootstrapped with $2 million, the liberal-leaning Huffington Post was even recognized recently by one of the publications from which it has likely stolen readers, Time magazine, which this year anointed Huffington and Matt Drudge as the two bloggers on its list of the 100 most influential people.

Blogger and journalist Om Malik, who recently left a full-time job at Time Inc. and raised several thousand dollars in venture money to launch his own blogging platform startup called GigaOm, says Huffington’s popularity is apparent. “The reason it can raise such a huge amount of money is that Huffington herself is such a star and that basically, she has tapped into the right kind of liberal media outlet, one that isn’t afraid to take a position.”

Tony Conrad, CEO of blog search startup Sphere and an investor in blogging software startup Automattic, says that Huffington Post also observes a golden if unspoken rule in the blogosphere, and that’s to keep posts short. “One of its reasons for success is format,” Conrad says. “Typically, a great blog is one to four graphs. That’s not to say there aren’t exceptions, but blogs work in tandem with mainstream media. I might actually be reading more mainstream media because I’ve been pointed to articles from blogs. Huffington Post does this tango or waltz really well.”

That the Huffington Post is taking some capital makes sense. Observes Malik, “At this point, given its explosive growth, it really needs to think in terms of scaling its operations. You can’t just have one single property, but you also don’t want to lose the original voice of the blog. Blogs work because of their point of view.”

What HuffPo has begun doing, and should continue to do, says Malik, is carefully grow ancillary properties. Indeed, it has already spun out the niche site Contagious Festival, which each month features work by designers, activists, filmmakers and comics and asks readers to rate what they like best. Another HuffPo property, Eat The Press, features and analyzes media chatter, both online and off.

Why it needs $5 million in outside capital to fulfill its vision is another question. Clearly, its founders aren’t hurting for money. Moreover, two weeks ago, Huffington inked an agreement with IAC/Interactive Corp., in which IAC’s Advertising Solutions sales group will exclusively sell advertising for the site. Malik, who has a similar agreement with ad sales startup Federated Media, says such deals “let people focus on content and not worry about the ad stuff.”

Huffington’s efforts to raise outside capital may suggest that it plans to sell itself to a larger media property down the road. At least one other political blogger says he has no interest in VC because he wants to remain independent. Markos Moulitsas, founder of left-leaning political blog Daily Kos, says: “For me, outside investment is not necessary and it would make little sense for me to jeopardize the site’s independence for a little more cash.” He says his site is “extremely successful financially,” thanks to advertisements, including one featured last week from Working America, a community affiliate of the AFL-CIO.

Additional reporting by Dan Primack