HuffPo co-founder Ken Lerer tells the New York Observer that the new CEO, Eric Hippeau of HuffPo investor Softbank, "thinks this isn't the time to be profitable-it's the time to invest." Investment is inevitable, since HuffPo has some $25 million in fresh venture capital reserved strictly for growth (as Huffington told us Monday, "The $25 million we raised from Oak has not been touched. It's available for our next round of expansion").

But why not finally turn profitable? In March 2008, more than a year ago, the New Yorker said the publication was "poised to break even." Since then, money has poured in; HuffPo brags it has doubled revenue over the past year and a half. Profitability, then, must have been restrained by expenditures, reportedly a longtime problem at HuffPo. There's been talking of trimming costs.

And yet Hippeau tells the Observer he's "not here to fix" the publication, "I'm here to grow it... we'll have deep partnerships with major players, which goes beyond content-sharing." Maybe one of these "deep partnerships" will take the problem of making money as an independent business off HuffPo's plate for good.

(Pic via Blip.tv's new interview with Hippeau)

Costs alone don't explain the leadership change. Incoming CEO Eric Hippeau, of Softbank, replaces Betsy Morgan, deemed less capable of growing the Web publication. Morgan was largely ineffectual, one former staffer said. "Generally ignored," said another insider, excepting those occasions when one was across from the former CBSNews.com manager at one of her long lunches.

Huffington, for the record, told us she "loved working with Betsy." That's to be expected, if you believe former staff: Morgan didn't fight Huffington on spending, we're told, but others on the business side have been pushing back for some time, on expenses ranging from new assistants to new computers to travel, accommodations and miscellaneous hiring

The board of directors, nominally in charge of business operations, clashed regularly with Huffington, a HuffPo insider said. "There were moments when the board would say, 'Absolutely no more spending and hiring,' and that would be violated.'"

Arianna is always hiring tons of people — five people to do the job one expert could do.

It doesn't help matters that Huffington has repeatedly used employees for personal errands, according to former staff. Throw in the recession and the earmark on HuffPo's recent $25 million capital round — it's reserved for expansion — and it's easy to see why costs might be an ongoing conern.

Huffington, though, insists there's been no problem whatsoever. "There has never been any concern about expenses," she wrote in an email.

The image associated with this post is best viewed using a browser.As if to underline the point, she confirms a bit of news about HuffPo's ongoing expansion into local markets: Helming the Huffington Post's forthcoming New York edition is Dan Collins, the hard news producer of CBSNews.com and husband of New York Times columnist Gail Collins.

The local HuffPo launches at the end of this month with help from Katherine Zaleski, 27, who for the past four years has been gatekeeper over the HuffPo's front page. Zaleski, whose father is said to be good friends with HuffPo founder Ken Lerer, has become Senior Editor for Special Projects.

Morgan joined HuffPo in October 2007 after working as general manager at CBSNews.com. As CEO, she served on the HuffPo board along with Hippeau, Arianna Huffington, co-founder Kenneth Lerer and Fred Harman of Oak Investment Partners, which in December put $25 million into the internet publication.

The image associated with this post is best viewed using a browser.That deal converted HuffPo's election buzz and traffic into dollars, signaling that the publication was entering the media big leagues. Another key development was an investigative reporting grant, accompanied by the influx of veteran editors from other publications, including one from the Washington Post.

It's been unclear whether the recent growth was compatible with founder Huffington's often volatile and always idiosyncratic management style; today's turnover could be a sign that HuffPo's investors demanded closer supervision — or, less climactically, simply wanted Morgan out.

UPDATE: HuffPo confirms, in a statement that pointedly notes, "The Huffington Post co-founders Arianna Huffington and Kenneth Lerer made the announcement" of Morgan's departure and not, say, Softbank. Morgan, meanwhile, pointedly notes that she's leaving with some shares of the company.

Huffington's quote:

Having worked closely with [Hippeau] for the last three years, I know firsthand what an invaluable asset he has been in our expansion. And now, given his impressive background in the industry and his intimate knowledge of HuffPost, Eric is uniquely able to hit the ground running as the company takes its expansion to the next level.

Hippeau was CEO of tech publisher Ziff Davis from 1989-2000 and serves on the board of Yahoo. At Softbank, he's a managing partner.

(Pic: Top via PaidContent, bottom via TechCrunch)

Yahoo's failure-prone four had between 18.2 and 22.1 percent of shareholders withhold their votes for reelection. Board members who met with Valleywag's approval — Eric Hippeau, Vyomesh Joshi, Bobby Kotick, and Maggie Wilderotter — scored between 7.1 and 9.3 percent. Only in corporate America would a passive-aggressive move like declining to vote be deemed "activist." All the same, to those shareholders who sat this one out, we thank you for your fealty.

One source told the paper, "The emotional part of Yang would rather do anything but sell to Microsoft, but he doesn't have the cards to come up with a value-creating, competitive alternative for shareholders." Reports yesterday indicated Yang's last hope remains with Rupert Murdoch and News Corp..