The New York Times Sells About.com At A Loss: Is Google To Blame?

The New York Times Company (NYSE: NYT) on Sunday agreed to sell About.com for $300 million to Barry Diller's IAC/InterActiveCorp. (Nasdaq: IACI). The all-cash deal comes after a bidding war between IAC and Answers.com, whose president, Peter Horan, offered about $270 million for the information website.

The sale, which is expected to be completed in a few weeks, is seen largely as an effort by the Times Co. to concentrate on its core media products, in particular its flagship paper, The New York Times. In a statement, Times Chairman Arthur Sulzberger Jr. said the sale of About.com will "allow the Times Company to focus on the development and growth of our core brands locally, nationally and on a global scale."

Diller, the 70-year-old media billionaire, has become something of a brand collector in recent years. His IAC has been building a stable of Web and print properties that includes Newsweek, the Daily Beast, Ask.com and online-dating sites Match.com and OkCupid.

IAC chief Greg Blatt said in a statement that combining About.com with Ask.com will help the former become more profitable. "The complementary nature of these two businesses will provide significant synergies going forward," he said. "And thus we expect that About.com will generate more profit as a part of Ask.com and IAC than it has been able to over the last few years."

In 2005, the Times Co. purchased About.com for $410 million in a move that some saw as one of Sulzberger's most forward-thinking decisions since succeeding his father in 1997. About.com represented only about 2.5 percent of the Times Co.'s revenues in the third quarter of 2006, but its operating profit grew substantially the following year. In 2007, Michael Golden, Sulzberger's cousin and a Times Co. board member, reportedly called About.com the second-best Internet acquisition behind Myspace.

Considering how the latter deal turned out for News Corp. (Nasdaq: NWS), it should come as no surprise that About.com's early growth proved difficult to sustain for the Times Co. In the last quarter, the website's revenue fell 8.7 percent to $25.4 million, and the company wrote down its value to $194.7. The Times blamed the decline on a change in Google's algorithm, which reduced the site's rankings and caused a loss of traffic over the last year. The company admits that About.com -- which offers information and advice on a variety of topics -- is sometimes criticized for lacking substance.

In February 2011, Google announced a major algorithmic overhaul to reduce the rankings of low-quality websites. The change was an effort to crack down on so-called content farms, which produce low-quality, keyword-heavy articles specifically for the purposes of landing high on search results. A few weeks after the announcement, the Online Publishers Association estimated that Google's tinkering shifted as much as $1 billion in online advertising revenue, with some sites experiencing substantial overnight growth and others declining almost instantly in prominence.

As late as 2010, Sulzberger was touting About.com's value to the company and its potential for growth. In a statement to stockholders that year, he said the website has become "an important part of our organization."

The Times Co.'s total revenues last year reached $2.3 billion.