The Huffington Post was not founded to be a business that generated enormous profits. Before it became the 154th most popular Web site in the world, its goal was chiefly political. Following John Kerry’s loss in the 2004 presidential election, Huffington and her co-founders, including the investor Ken Lerer and the digital-media savant Jonah Peretti, conspired to create a liberal version of the conservative online juggernaut, the Drudge Report.

By then, Arianna Huffington did not need the money, anyway. She had grown up in Athens, the daughter of a journalist, and moved to England with her mother at age 16. Although at first she spoke very little English, she quickly learned and fulfilled her ambition of getting into Cambridge University. She served as the head of the Cambridge Union, the famed debating society, and graduated with a master’s degree in economics. From there, in 1980, Huffington moved on to New York City, where she “ingratiated herself into society,” says a former colleague, and then met and married Michael Huffington, an oil millionaire. They subsequently moved to Santa Barbara, where he ran for Congress as a Republican and won.

They had two children, Christina and Isabella, but divorced in 1997, the year before Michael publicly came out as bisexual. (He had told Arianna back in 1985, not long after they met, he has said.) Huffington soon shifted her political alignment, abandoning the G.O.P., and, in 2003, she briefly ran as an independent in a special gubernatorial recall election in California. Arnold Schwarzenegger soon dominated the race—“the hybrid versus the Hummer,” Huffington called it—and she withdrew before Election Day.

In 2005, she launched the Huffington Post. As it became a huge success, Huffington, who had little experience in technology or journalism, saw her own brand grow in tandem. But life on the Internet can be cruel. And in a few short years, the site was experiencing a Digital Age version of a midlife crisis. It was reaching 26 million unique visitors per month, an astonishing number, but in the Internet business, sites either grow or shrink. And to grow, the Huffington Post needed more money. The obvious solution was to find a buyer with deep pockets, and in 2011 she found one: Tim Armstrong, a founder of Google’s vaunted advertising business, who had by then had become chief executive officer of AOL.

Huffington had met Armstrong after hearing him talk at a digital-media conference. They soon struck a deal. According to the internal memorandum about the transaction that Armstrong presented to the AOL board, now available on Smoking Gun, Huffington received around $21 million from the $315 million sale, $3.4 million of which was in options that would vest over a 20-month period. Since she had put none of her own money into the Huffington Post at the start, and owned only a 14 percent stake at the time of the sale, this was a sweet payday.

But Armstrong’s deal memorandum also revealed some implicit risks, including the possibility of a class-action compensation claim by the Huffington Post’s armada of 18,000 unpaid bloggers. Perhaps the biggest risk, however, was yet to be recognized by Armstrong: the unpredictability of the editor in chief.

Armstrong considered Huffington “a critical element to HuffPost . . . and her name is a key [intellectual property] asset,” he wrote at the time. But his memo to the board also, in retrospect, reveals that Huffington had overshot in the performance projections that she presented to AOL. In 2010, the site generated nearly $31 million in revenue but made a profit of less than $1 million. In 2011, Huffington expected to double revenues, to $60 million, and profit was expected to balloon to $10 million—no doubt helping to justify the purchase price, which was still more than 30 times Huffington Post’s projected profits. Armstrong seemed convinced by Huffington’s prediction that her business would explode in the coming years. She projected the company’s revenue and profit would surge to $115 million and $36 million, respectively, in 2012, and increase to $203 million and $73 million, respectively, in 2015.