Patch Misses 2012 Revenue Target | Street Fight

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Patch Misses 2012 Revenue Target

7 Comments 08 February 2013 by

aol-s-patch-sites-get-iphone-app-for-hyperlocal-news_1Patch missed the $40 million to $50 million revenue target set by AOL for 2012, which CEO Tim Armstrong attributed to disruption from superstorm Sandy in the fourth quarter during a Friday earnings call. The company remains committed to achieving run-rate profitability for the hyperlocal network by the end of 2013 — a goal being reached, in part, through continued cutbacks implemented since Armstrong first announced the projection in last year’s second quarter.

The future of Patch plays big in AOL’s turnaround efforts, particularly as it looks to transition the web giant out of a prolonged restructuring period into a growth phase. The implicit message was clear: Patch may not drive growth in the near term, but it needs, at the very least, to get out of the way. The hyperlocal network’s losses continue to drag on the returns of AOL’s brand group, which include powerhouse media brands like The Huffington Post, AOL.com, and TechCrunch.

AOL remained mum on Patch’s performance in 2012, saying only that losses at the closely watched network “decreased” from a reported $150 million loss in 2011.

Given the substantial cuts made during the second half of last year, the path to profitability in 2013 will likely have to come through the revenue side of the equation. Armstrong pointed to two areas — regional advertising and media partnerships — as potential growth areas for the property over the next 12 months.

“We played very heavily in the national and local segments until now, and we’re just untapping the regional revenue now,” Armstrong said. “We expect to make progress revenue-wise on this front.”

On the partnerships side, the company has seen interest, and content partnerships with legacy media brands could play into the equation moving forward, according to Armstrong: “If you own a TV station, newspaper, or media company in a major metro [area], chances are you’ve cut back on your content investment. But Patch has surrounded your assets,” he said. “ We see a lot of opportunities there overall.”

One interesting development is that AOL appears to have recommitted to one of its original hyperlocal properties, MapQuest. Armstrong mentioned the property in his prepared remarks, telling investors the business had “real value and is turning around.” It’s unclear where MapQuest fits on the revenue equations for AOL, but Armstrong highlighted the platform’s massive amounts of transit data as “an interesting business-to-business opportunity” for the company.

In his closing remarks, Armstrong quoted Andy Warhol in a fitting summation of Patch’s tumultuous ride over the past year: “Don’t think about making art, just get it done. Let everyone else decide whether they love it or they hate it. While they are deciding, make even more art.”

Steven Jacobs is deputy editor at Street Fight.

  • http://www.facebook.com/people/James-Foye/100001334614361 James Foye

    LOL – everything is Sandy’s fault. How exactly that is the case for Patch is hard to understand. Given that Everyblock just shuttered yesterday, I can’t imagine how Armstrong things Patch will ever be anything other than a money drain. The idea that hyperlocal can be centralized is a joke.

  • http://www.ecape.com/ Julie Brooks

    Sandy? Mapquest?

  • Angry Patch Advertiser

    Patch and AOL are thieves.
    I own a business that advertises on a Patch. I liked Patch. They covered all the things the newspaper stopped covering. So I bought six months of advertising. Three weeks later the local reporter left and they never replaced her. No w I’m paying for garbage news from other communities.

  • Cranky Investor

    Only

  • Cranky Investor

    Only six months ago Armstrong come out with that ridiculously
    wide range of $40-$50m in revenue, and the actual number comes in at
    $34M. Not even at the low end of the range… Then he blames Superstorm Sandy, a storm that impacted primarily NY and NJ the last 2 months of
    the year and poof, $11m of revenue vanished from the mid range of his
    estimate. That was some storm! Interesting how 80% of Patch
    revenue comes from the remainder of the US (not impacted by Sandy)… Did
    all NY and NJ advertisers pull 100% of their ads 11/1 – 12/31 (even though that was the most heavily trafficked period for Patch all year)? Those 2 states alone would need to generate $65m annually to reflect the $11M miss. Considering the
    entire Patch unit generated $34m, the math doesn’t seem to work. Blaming Superstorm Sandy for an average $11m forecast miss made 6 months ago seems ridiculous.

  • LongOnAOL

    Aside from some arbitrary revenue “target” that doesn’t work when applied to start-ups, Patch more than doubled it’s revenue in 2012 from 2011. That’s pretty great. If they do that again this year, and contain some costs, they’re all good.

  • Patch Adams

    Can you imagine any CEO who has his hands on a business unit come out and give a revenue estimate of $40M to $50M? Kinda like Tim Cook saying Apple will drive between $200B – $300B of revenue this year. Clearly, no clue where this business is at/heading. Did he give a Patch expense range of $150-$200M as well? While it may have been his baby coming in, clearly neither he nor his team has a handle on the Patch business.

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