AOL Opens Its 100th Patch, Targets 500 By Year's End (TCTV)
When AOL bought hyperlocal news site Patch in June, 2009, it covered five towns in Connecticut and New Jersey. On Tuesday, it will open its 100th Patch, and by the end of the year it plans to open 400 more for a total of 500.
Context & Ripple Effects
Patch is the centerpiece of AOL's pivot away from declining legacy businesses: after confirming Bebo 'failed' and moving to unload it earlier in 2010, CEO Tim Armstrong has staked the company on owned-and-operated content. The June 2010 reorganization into advertiser-facing 'Super Networks' and plans to hire hundreds of journalists are the staffing side of the same bet; Patch's jump from five Connecticut and New Jersey towns at acquisition in June 2009 to its 100th site is where that hiring lands.
The March announcement of a $10 million venture fund for local startups signals AOL wants to own the local layer through both building and backing. Opening 400 more Patches by December would make Patch one of the largest single employers of local journalists in the country within roughly eighteen months of purchase.
First-order effects
- Hundreds of newly hired AOL journalists, editors and videographers have somewhere to be deployed: a 500-site Patch network gives Armstrong's content-first reorganization its largest single destination and its main pitch to local advertisers.
- Local advertisers in mid-size towns get a packaged buy for the first time at this scale — Patch sites can be sold as a network rather than town-by-town, which is precisely what the Super Network structure was built to sell.
Second-order effects
- Incumbent local newspapers in Patch towns face a well-funded competitor giving away coverage funded by national ad dollars, forcing them to defend the classifieds and small-business ad base Patch is built to take.
- AOL's $10 million local startup fund now operates alongside a company-owned rival: grantees and Patch will compete for the same local ad budgets and talent, making the fund partly a hedge on which local model wins.
Third-order effects
- Scaling from 5 towns to 500 in under two years is a wager that hyperlocal economics improve with central scale — shared sales, templated sites, centralized editing — rather than per-town profitability; if that assumption holds, local news consolidates around platform operators, and if it does not, the fixed cost of hundreds of staffed sites becomes the industry's cautionary template either way.
- The move accelerates the split of local journalism into venture-scale networks and volunteer/blogger models, since no independent town paper can match a national balance sheet hiring reporters below market rate.
The trend: AOL is rebuilding itself as a scale content operator — buying audience with payroll rather than acquisitions — and Patch is the test of whether hyperlocal news works as a centrally-run network rather than a collection of local businesses.