Niel Patel

AOL’s Patch, a website reporting local news to over 1,000 local communities, hasn’t been as profitable as AOL hoped. The program was launched in 2007, bought by AOL in 2009, and has recently incurred a $44 million restructure and impairment costs. Third quarter financials reveal that net income for the program has dropped by 90%, to $2 million.

The site is actually a nifty way to get your local news and it’s loaded with content but the brand development is still a work in progress. The current substitute, local newspapers, are reputable names and generally accepted by communities for quality articles. AOL groups Patch along with brands such as Huffington Post and TechCrunch. Perhaps AOL can leverage the established brands to help build the newcomer by advertising or integrating Patch’s local news into Huffington Post.

Another potential issue with Patch could be the operating costs for running the program. 1,000 local news sections require over 1,000 professional jounralists/editors, more office locations, and generally too much overhead. Will the online platform take off? The concept is great, but the accepted local newspapers could compete in the online space unless Patch can bring better content. Tim Armstrong (Chief Executive at AOL) believes the project is actually doing well despite the losses.

Sources:

1. AOL’s Revenue Rises on Higher Ad Sales

http://online.wsj.com/news/articles/SB10001424052702303482504579179443498659788

2. AOL ad sales rise, but Patch websites weigh on profit

http://www.reuters.com/article/2013/11/05/us-aol-results-idUSBRE9A40I520131105

3. AOL may never be able to patch up Patch

http://tech.fortune.cnn.com/2012/02/15/aol-patch/