Can Bloodied Patch Pull Off a Digital ‘Rocky’?

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Patch has taken a triple hammering in recent weeks. It was like three Dempseys ganging up against one Jess Willard. The Wall Street Journal, Bloomberg Businessweek and Patch owner AOL’s biggest minority shareholder, Starboard Value, whomped the pure-play network with a combination of jabs, crosses, hooks and uppercuts aimed at what they all see as a glass jaw — a super-costly business model that depends on impossible revenue.

But wait, might this seemingly grim narrative be turning into a digital Rocky?

AOL’s network of hyperlocal sites is retaliating with some scorecard-worthy counter-punches, producing strong numbers recently:

• Users grew to a record 11.7 million in May, an 11% increase over the previous record of August 2011.
• Visits per unique visitor — a measure of engagement — increased 12% from April to May.
• Revenue for May hit a new record that was 14% higher than the previous record of November 2011, and 17% over April’s mark.

“We are extremely gratified to see these measures of the traction we have gained in our communities and in our business since our launch just over 3 years ago,” said Jon Brod, CEO and co-founder of Patch, in a news release. “We are laser-focused on continuing to serve our users and advertisers with high-quality content and impactful products, and building upon our success to date in innovative and engaging ways.”

Does this mean that Patch’s jaw may be more granite than glass?

I don’t see how anyone can’t be impressed with Patch’s reach — 863 community sites in major markets that were put together in two-and-a-half years. If this network really begins to hum as a news machine whose gears whir down to the community level, AOL will have a formidable property with the reach and engagement that could attract plentiful advertisers.

But there are some big buts complicating this scenario, and they start with editorial.

Energetic journalists staff many of those sites. They’re plugged in to short-wave police reports and they scribble away at public hearings. But a strategy based on one reporter-editor per site means that the Patch news world usually revolves around a 20-something journalist, like the one in Northbrook, Ill., who the other day wrote about water-main repairs on “Waukeegan Road” when he means “Waukegan.”

Parachuting inexperienced journalists into a community where the buck begins and stops with them can lead to bloopers like the Hermosa Beach Patch’s top-of the page headline Tuesday morning asking: “Will Kings Win Stanley Cup Tonight?” The answer actually came the night before, when the Kings beat the New Jersey Devils in their Cup-deciding sixth game. (The site finally woke up at about 9:30 a.m. Tuesday with a post-victory story that had nothing to do with Hermosa Beach.)

Hermosa Beach Patch may have been asleep on the Kings’ Stanley Cup victory, but that win, as historic as it was, doesn’t affect the quality of life in Hermosa Beach. What does matter are issues like whether Hermosa Beach should lift its ban on oil drilling. On June 6, the Hermosa Beach Patch dutifully covered the announcement of new studies on the pros and cons of drilling, but its story was a mishmash of technical details that waited until the ninth graf to point out that the decision on drilling will go to a public vote. The competing Beach Reporter is leisurely with its news postings, but its June 6 oil-drilling story was clearer, had more background and its lead graf pointed out that the public will make the final decision.

The contrast in coverage between the two sites was not happenstance. The Patch story was written by a young editor whose education, experience, and primary interest are in photojournalism. The Beach Reporter story was written by the paper’s publisher, who has more than two decades’ experience in community journalism.

This is the quandary that Patch faces in many of its communities. Its network is a formidable construct, but the top markets AOL has chosen to enter often have competing publications — many in both print and digital form — that have been community fixtures for years. Some of those publications, like the Beach Reporter, may be a bit sleepy-headed digitally, but invariably they are on top of the biggest stories in town. They have the institutional memory that can give them the edge even over a journalistically aggressive Patch site.

Patch could compete more effectively if adopted a community-faced editorial strategy. Instead of building a Ptolemaic news gathering universe in each community centered on one young, inexperienced, overwhelmed reporter-editor, it should set about recruiting regular reporter/contributors who live in the community. But instead of doing it in the helter-skelter way that marked hyperlocal’s first phase of citizen journalism from the previous decade, Patch should draw up a list of topic areas that are most valuable to each community, then try to find residents who know and care about those topics and cultivate them energetically as potential contributors. If volunteer reporter-writers are spirited advocates, so much the better, as long as they’re so identified. Patch’s bloggers aren’t the answer editorially because they write about anything and everything under the sun (e.g., “Worn Tires and Low Pressure Contribute to Accidents,” from the Herndon, Va., Patch).

In time, Patch sites could build a stable of volunteers whose local knowledge and connections will more than outweigh their ability to construct a story in the form of an inverted pyramid. Morale will be maintained if the most productive volunteers are given honoraria for their best stories. Local recognition for helping to protect and enhance what’s valuable to the community will mean more to the volunteers than any honoraria. That can be reinforced with an annual dinner salute.

A community-faced editorial strategy would help to cut the enormous staffing overhead that makes the Patch model unsustainable. It would also help individual sites build on the engagement they need to get the attention of local advertisers. As Starboard Value pointed out, Patch has to fill its ample ad inventory with remnants that yield as little as $1 or $2 per thousand impressions, sometimes even less. These heavily discounted ads often come from other AOL properties as AOL tries to make Patch look good, according to Starboard. The investment company estimates that less than 20% of Patch’s ads are local against a goal of 80%. It’s the local ads, of course, that have higher CPMs ($10-$15 and more).

Patch built its 863-site network so fast because it hired a lot of expensive people in areas like technology. But at the community level, this elaborate infrastructure doesn’t make any sense. None of it helps Patch get ads from neighborhood restaurants, personal-care salons and lawn-care services — the kind of ads that fill the pages of independent hyperplocals like West Seattle Blog, Baristanet and WestportNow.

Starboard projects that Patch will never be profitable under its business model even if it makes its revenue goals. If that’s so, then the new numbers that Patch is proclaiming are whispers in the wind.

To test who’s right, Patch ought to set up an experimental low-cost operation outside of the network with a cluster of sites headed by entrepreneurial editor-publishers who buy Patch licenses and sink or swim on their own. Patch is not in metro Denver, so that might be a good place to experiment.

Who knows, the outcome might be a digital “Rocky 8.”

Tom Grubisich authors The New News column for Street Fight. He is editorial director of LocalAmerica, which is developing a Web site to rank communities on their livability across 20-plus categories. The rankings will be dynamic, going up and down daily as they are updated through a combination of open data, journalism and feedback from local experts and users of the site.