Not likely.

Arianna Huffington

So far AOL’s turnaround effort, especially its acquisition of The Huffington Post, carries the appearance of shuffling the deck chairs.

At best the business model sold to investors is one similar to the dot-bombs: lots of hype coupled with loose talk about advertising revenue based on audience numbers.

This is a pure marketing driven turnaround and it would seem that AOL’s new strategy does not acknowledge three huge issues:

• Too much profit-draining complexity from a mishmash of news and 50+ unrelated information sites
• Too many existing substitutes and competitors
• Low barriers to entry for new competitors

Perhaps AOL’s shareholders won’t blame CEO Tim Armstrong for throwing a Hail Mary. The company’s numbers have been headed south for a decade. But he will likely take a fall for throwing the pass to Arianna Huffington, a micromanaging self-styled celebrity with zero big company or turnaround experience. Ms. Huffington is the new editor in chief of AOL’s 50+ content sites which makes her the #2 executive in the company, behind only Mr. Armstrong.

To her credit, Ms. Huffington did a superb entrepreneurial job of building her small, left-leaning company’s revenue from zero in 2005 to $31 million in 2010. However much of that growth can be attributed to some factors outside her control:

• The 2008 presidential campaign and the accompanying hate-fest of most things conservative.
• The rise of social media, especially Facebook and Twitter.
• The keen desire, and new ability, by millions to share their opinions with vast audiences.

[A noticeable portion of HuffPost's content is unoriginal material that's simply reposted from other sites and blogs. HuffPost is currently facing a class action lawsuit from contributing writers who believe they deserve a piece of the pie.]

Ms. Huffington, or someone on her team, was clever enough to recognize the convergence of emotion-charged political rhetoric with an explosion of ways to express it. Positioning HuffPost at the front of that wave was a very good strategic move and allowed the company to grow its niche audience nicely. Although content acquisition was cheap, HuffPost reportedly was profitable for the first time in 2010.

But perhaps these same smart people are now seeing a slowdown in growth and realizing that their company was birthed by a couple of trends that have reached saturation in HuffPost’s addressable market. Hence the eager acceptance of AOL’s marriage proposal rather than wait another year or two to double the company’s valuation through the organic growth that’s being touted to investors.

Besides having $31 million in revenue HuffPost had about 100 editorial staffers in 2010. By comparison, AOL had revenue of $2.4 billion and 1,200 editorial staffers in 2010. While HuffPost is claiming rapid revenue growth, AOL’s is sinking like a stone. The company’s revenue fell $800,000 in 2010, a decrease of 25% from 2009′s $3.2 million.

AOL’s latest strategy is to stop the bleeding of advertising and dial-up subscription revenue by transforming itself into a go-to news and content company, a’ la Rupert Murdoch’s organization but online only. It’s doing this Huffington-style on a brocade of dozens of unrelated information sites interlaced with social media. That’s a lot of expensive complexity to manage. In addition, HuffPost is largely personality driven. Many of the topics are suggested by Ms. Huffington and much of the content is based, and biased in our opinion, on her personal experiences and viewpoints. This is perhaps a decent formula for building a smallish niche company but hardly one to rescue a multi-billion dollar icon of yesteryear that’s been in a death spiral for the past decade.

Because of its new focus on Ms. Huffington’s celebrity, the media businesses of Oprah Winfrey and Martha Stewart are good comparisons to the new AOL. Ms. Winfrey’s business is not complex, has a clearly defined, purchase-ready target market and seems to be well run. Ms. Stewart’s business is more complex because the business portfolio includes product merchandising. However her company also has a clearly defined, purchase-ready target market.

Here are some key strategic comparisons:

With this merger AOL seems to be grasping at straws. Ms. Huffington has proven successful as a small company entrepreneur but she’s no Oprah Winfrey or Martha Stewart. She’s not even a Donald Trump for that matter.

She will have a difficult time in this environment.