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In 2007, Tim Armstrong was the head of Google's North American ad sales, making him one of the company's most important and powerful executives.

He was also very interested in local content, and disappointed by the lack of information about his hometown, helped start Patch Media, a company dedicated to building a network of local news and information.

After Armstrong became CEO of AOL in 2009, AOL purchased Patch and started funneling money into the network with plans to establish a footprint in hundreds of cities.

The Patch opportunity, on paper, was huge. If AOL could build Patch properties into the go-to destinations for news and information for residents of towns across the United States at a time when many local newspapers have gone out of business or are fighting for life, it would build a powerful local advertising platform.

Local advertising, of course, has been a holy grail of sorts for digital ad executives like Armstrong, but many who have tried to figure it out have failed.

Critics, which there are many of, have suggested Patch will also fail. Since acquiring it, AOL has pumped over $150m into the network, but it hasn't yet turned a profit.

That isn't, however, a result of extravagant salaries for editors and contributors. The network's 700-odd Editors not only don't receive lavish salaries and perks, they reportedly have limited budgets with which they can hire freelance contributors.

And since Arianna Huffington joined AOL, there has been a growing focus on recruiting an army of unpaid bloggers, Huffington Post-style.

AOL obviously can't continue investing huge sums of money into Patch without seeing a profit, and Patch's days as an AOL property may run out sooner than later.

According to the Business Insider, the company is scrambling to make Patch look like a financially viable venture, and to show a profit for at least 10 Patch sites.

In an effort to do that, the Business Insider also reports that Patch is now asking editors to do get behind marketing and ad sales. They quote a "'riled' Patch editor from the East Coast" who says that he has been told that generated ad sales leads is now one of his job duties.

The anonymous editor stated:

Requiring journalists—already run ragged by their normal duties—to do this is so far beyond the pale it actually makes my stomach hurt.

This was definitely not discussed in the many job interviews that I went through to get this position, and was not discussed during my training. We were told in general terms that we would be the face of Patch in our areas, but there was no mention of having to do actual marketing work and generate sales leads.

Obviously, if true, this is a bad omen for AOL and Patch. The duties of an editor are not the duties of a marketer or ad salesperson, and asking a single individual to take on all of these duties doesn't make much sense. The only reason any company would do it: to save money.

Which highlights an unfortunate reality about 'local' that AOL is clearly recognizing: the opportunity is huge but the manpower, financial resources and strategic wisdom required to exploit it is even greater.

The problem with Patch, of course, is that AOL never had a model that's profitable. Armstrong took the scale first approach you might expect someone with his background to, as scale is what advertisers demand on a national level.

But profitability first is arguably what's required to win at a local level. After all, if you can't build a single local site that generates a significant amount of its revenue from local advertisers, and run it at a profit, chances are you're not going to be able to build 500 local sites and expect the network to miraculously be profitable.

Patch is proof of that, and if its attempt to turn its editors into marketing folks and ad salespeople are any indication, the venture may be one of the biggest digital flops in the world of local.

Patricio Robles

Published 26 September, 2011 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2392 more posts from this author

Comments (3)

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Bobby B

Patricio - - my man!

Don't get your information from Business Insider.
Those second-handers can't even get an interview with anyone at Aol - they are on the outside looking in! And they are hacks and HATERS.
Don't go down that road to nowhere.

Try getting an interview with someone at Aol or Patch and get some facts for your story - that's right, facts. Facts are good.

If you ask people in the business community, they LOVE Patch and know it's going to be huge - - this is the same concept that makes the drive-by-media crazy with fear and dread.
I love Patch, as does everyone in my community, and we are very excited to finally have this kind of a site in the U.S. - putting people to work in towns all over this wonderful country - Creating jobs, and adding value to people's lives. What could be better?

Get an interview - and write a serious piece. This one was beneath you.

almost 5 years ago

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MassGuy

Your post was right on and accurate. Patch is a nice idea, but they now want to make money on all volunteer labor outside of the ridiculously overworked "editors". Can't see how they last - and I was part of them.

almost 5 years ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy

Bobby B,

"If you ask people in the business community, they LOVE Patch and know it's going to be huge - - this is the same concept that makes the drive-by-media crazy with fear and dread."

Really?

Yes, the business community is raving:

"Other ideas include closing Patch, AOL’s local news initiative that has reporters in 850 towns. Eliminating the money-losing service would free $160 million and lift AOL into profitability."

https://www.nytimes.com/2011/08/18/technology/the-remake-of-aol-is-still-being-written.html?_r=1

"Armstrong's dream, indeed, is also a giant risk –- one that is unlikely to ever gain favor with public shareholders. With Patch, he's trying to build a national network of local news sites. It's an incredibly expensive, highly uncertain undertaking, but Armstrong still seems determined to make it a cornerstone of AOL's strategy. In reporting the company's dismal second-quarter numbers earlier this month, Armstrong said a turnaround would take until 2013."

http://tech.fortune.cnn.com/2011/09/01/tim-armstrongs-aol-dream-may-be-ending/

And editors being asked to run themselves into the ground? None will put their name on such a claim. Oh, wait:

"One writer, Ed Pilolla, is this week writing a series of posts about his Patch experience, starting with why he took the job, his take on the pay and how many stories he was expected to produce a day. Pilolla, who apparently doesn’t work for Patch any more (and coincidentally took part in this year’s WordCount Blogathon), says he routinely put in 75 hours a week, which meant that his annual salary worked out to be something like $10 an hour."

http://michellerafter.com/2010/08/19/aols-patch-hyperlocal-hiring-spree-boon-or-bane-for-writers/

And AOL's local ad execs seem confident...that there are better opportunities elsewhere:

http://finance.yahoo.com/news/Amid-Promises-Of-paidcontent-3667342157.html?x=0&.v=1

Finally, as for the fact that AOL is trying to get ten Patch sites to profitability this year, that's from the horse's mouth:

http://paidcontent.org/article/419-armstrong-certain-patchs-will-be-profitable-by-end-of-2011/

If you don't believe that AOL is asking Patch editors to do marketing and ad sales, that's fine, but the idea that Patch is doing great financially simply isn't backed up by the facts.

almost 5 years ago

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