7 Key Lessons From AOL’s Struggles With Patch

patchAOL’s Patch network of hyperlocal sites is in free-fall — nearly half of its 900 locations across the country are being shut down or partnered off and hundreds of millions of dollars have been lost. The perception from outside is that Patch is a catastrophic failure.

But don’t miss the learning in this.

The reality is that for nearly 100 years newspapers dominated media, but it was domination defined by complacency and stagnation. For newspapers, using color was a major innovation.

So why did a well-heeled usurper to newspapers find itself imploding last week? There are some critical lessons to be learned from Patch’s effort to fill the void of the failing newspaper industry amid consumers’ rapid shift to digital. Here are seven:

Lesson One: We need new leaders and innovators.
The Local Stack - calloutGive AOL’s CEO Tim Armstrong credit for trying to take advantage of a mammoth business opportunity. In a five-year period from 2007 to 2011, the newspaper industry lost more than $20 billion in revenue — shrinking to pre-1950 revenue levels.  While Armstrong’s venture may not be a success, the newspaper industry failure is far more monumental. He ultimately may lose $300 million, but the newspaper industry has essentially blown a $60-plus-billion near-monopoly industry.

Now, leading newspaper brands are being sold as playthings for the super rich and for the value of their real estate to sports team owners.

Armstrong took a swing and may have missed, but undoubtedly he has helped the learning process.

Lesson Two: Journalism matters.
The struggles at Patch may ultimately be linked to the lack of understanding of the value of content. Armstrong came out of a Google culture in which a there is a perception that there is a technology or user interface answer to most everything.

But in local journalism and information, the content is imperative. It is what attracts the reader. And consistent content valued by a community creates behavior. That behavior is monetizable as advertisers want and need to get their messages out to local readers.  This is the formula that built newspapers — local content that mattered. Patch missed this crucial variable in the formula.

A couple of months after GoLocal launched its first market in 2010, a former community newspaper editor who had been hired to oversee a cluster of Patches called me and said: “You got it right. We don’t. You break big stories and we write about knitting clubs.” (Also read “Just Another Chat with a Frustrated Patch Editor.”)

The lack of focus in the Patch model or even awareness of the importance of content is an insult to the consumer and is the root cause of the condition where Patch is today. Why would you go to a news web site that has no real news?

Lesson Three: Patch’s “Go where the rich people are” strategy was flawed.
Targeting primarily affluent suburban communities to build audiences may have seemed like a smart strategy from the outside. But the problem with this is that rich towns are boring — it is why people move there. Good schools, safe neighborhoods, and pretty parks are not the hot topics that most Americans seek to read about. Cities with corrupt mayors, great restaurants, vibrant colleges, and pro sports teams are far better subjects for news coverage.

Meanwhile, the local businesses that populate these suburban towns aren’t necessarily any more likely to advertise than those in less affluent communities. Pizza places and used car lots can’t sustain a local news business model. Affluent communities may be rich, but they aren’t rich with advertisers.

Lesson Four: Patch viciously violated economies of scale rules.
A few months ago I sat down with a top Patch executive and pointed out that in the two geographic areas where our markets overlap, they employ more than 80 journalists. I told him that if I had his workforce under our model we would file more FOIAs, break more corruption stories and produce more news coverage (in text and video) than any other news organization in New England. GoLocal’s content is regularly picked up the leading news organizations in the country — we break big stories.

Not only has Patch failed to produce much serious journalism, but the Patch model results in the repetition of innocuous, limited-interest content over and over — sometimes producing functionally the same story twice for adjacent towns.

When the digital media world primarily monetizes on a CPM structure and the going rate for local is $10, then there is a fundamental problem with Patch’s business model if an average story costs $50 on average to produce and only 50 readers read that story.

Lesson Five: Passion.
Pick up an Apple product or tune into The Newsroom on HBO; there is no question that those products were created by passionate people driven to excellence. Even today, read a copy The New York Times — it is written by a group of reporters who are driven to report better than anyone in the world.

When you look at a Patch site, there is a fundamental lack of passion evident in the product. A number of the Patches are staffed by competent local journalists, but make no mistake about it, the company culture oozes apathy.

Lesson Six: Going fast does not fix a flawed model.
While the Patch model has some Patches that by every measure are successful — they are the primary news source in their community, they spark community engagement and they are financially successful on their own — those are only a small fraction of the universe of Patches (a number that may be in the single digits as a percentage of the overall franchise). In 2010 and 2011, literally hundreds of Patches were launched across the country. Certainly, the smarter strategy might have been to get the vast majority of, say, the first 100 running and profitable before launching the following 800. After all, time was on Patch’s side as it was clear then (and is clearer now) that the newspaper industry was not going to innovate.

Lesson Seven: Innovate.
The Patch of 2009 and the Patch of 2013 are remarkably similar except that its reporters have far fewer resources and their workloads have doubled, tripled or worse. It’s hard to see in the Patch model how learning of success was transferred or identified mistakes were corrected across the country.

The opportunity to leverage hundreds of experiments seems to be one of the biggest lost opportunities. Patch launched no city-wide sites. Patch launched no all-digital statewide news structures. Why continue to roll out franchises in a fast food chain if the ones you’ve got aren’t working yet?

The competition to innovate and recreate news gathering, reporting, and monetizing is about to explode. Ultimately, Patch could still reinvent itself. But if it does not, there are plenty of lessons to be learned and applied to all of us driven to produce the next model of journalism.

(Read the Patch view “Here’s Ten Things We’re Doing RIGHT”)

Fenton, JoshJosh Fenton is the co-founder of GoLocal24, a digital news company focused on local media in midsized markets (not hyperlocal).

  1. Mark Swanson
    August 12, 2013

    You missed the biggest lesson — journalism costs money, even community journalism. Somehow, we have to teach the public that they’re going to have to pay for it with more than eyeballs on display ads.

  2. Michael
    August 12, 2013

    Patch is a joke. Patch’s coverage contained “false and misleading” information.

    Lawsuits are stacking up due to poorly written community stories that were Politically Motivated

    Patch practiced “yellow journalism.”

    Patch should be shut down as a whole. Patch is paid by people who want to vilify and defame a person out of vengeance and hate. Patch became an instant friend to Corrupt politicians who paid into patches advertising. This was a sure way of creating negative publicity for their opponent.

    Patch produced fraudulent stories that were misleading and untrue. They allowed political investors to create and manufacture these stories with the intent to defame and destroy people maliciously and that is the practice of PATCH

  3. Its the sales, stupid
    August 12, 2013

    Josh – great insight, except in regards to the business model (FYI – Patch doesn’t sell local ad space on a CPM basis; they use share of voice which effective salespeople can use to overcomes low page views by focusing on quality over quantity & the 24/7 nature of an SOV campaign). How can you write this piece without knowing the basic sales model??? Like most coverage I’ve read about Patch, you try to cover the story with analysis of the content side. You miss the fundamental truth in any business: the best product doesn’t always win. The product with the best sales/operational strategy usually does. In business competition, when one company “wins”, people on the product side always take that to mean “best product” (’cause yeah, Wonder DOES make the best bread in the world, and Budweiser is undoubtedly the best beer made in the world). Talk about the need for quality content all you want; in a world where a ‘Gangnam Style’ video generates one BILLION page views, it kind of rings hollow.

    Every successful media sales manager at one point or another has outsold competitors who offered superior products (due to a better staff/strategy), and more than likely they’ve experienced the pain of being outsold by a company with an inferior product as well.

    What I’m saying is, Patch’s content decisions make great fodder for journalism wonks, but they have had little to no impact on the business success/failure of the model.
    It never does. Only journalists think otherwise.

    1. Mark
      August 12, 2013

      Spot on, with the Sales Operations comment. Just looks at where companies invest the most money, the Sales organization. that is especially true in Media companies.

    2. Harry Buchan
      August 13, 2013

      So let me get this right Sales teams can sell any old rubbish, the product/brand doesn’t matter ? Presumably only (some) sales people think that.

  4. Base193
    August 12, 2013

    Bad journalism? No, plenty of those type of rags out their are successful. Journalism Costs? Well, that doesn’t define why Patch is failing, that is simply an observation. No, the real problem is from the Top. The top level people who are in charge of making it all work, have simply failed to do so. It is that simple. Their job is not to be journalists, or ad sales reps, or technology implementors, their job is to simply “make it work.” They have failed. We can all argue and speculated on what we think was important or stupid decisions along the way, but the bottom line is that these guys/gals are failures. Nothing personal. It is simply an un-contestable fact. They have failed at what might have been the biggest challenge of their lives. Their failure has affected hundreds and even thousands of other people’s lives. Many people might get emotional over it. Many might be upset because it seems so unfair. And it is true, that those who have failed to make it work will certainly not ever pay the price for that failure. A true price would be for them to never work in management again. But that won’t happen. They will go on to waste some other investor dollars somewhere. Sure their is plenty to be upset about if you choose to be upset. I know what someone could do. There should be a site that simply lists the management people at companies that have failed. I’m not kidding. A list of shame should be out there on the web, to live forever, so that lessons might be learned…. But I have spent too much time already on this comment. I have work to do figuring out how to do it right and then to start moving forward to implement that plan….

  5. Dead Tree Publisher
    August 12, 2013

    I’m the publisher of a small chain of print weekly newspapers in an affluent suburb. Patch has started sites in our towns, but have really deteriorated in the past couple of years.

    You have an interesting analysis here, but I’d like to add a few comments to consider.

    First, when you talk about the demise of print publications, you are conflating local newspapers with our big brothers in the regional and metro markets. Local weekly newspapers in many areas are still doing reasonably well financially. We’re not getting rich, but we’re able to meet payroll each week and take home an upper middle class income on top of that. There really are enough local advertisers to support a newspapers, and affluent towns do tend to have more advertising than middle class ones. Don’t denigrate pizza places and auto dealers — their advertising dollars feed my kids!

    Of course, we don’t have the layers of middle management that AOL has, nor do we have to meet investor expectations. IMHO, AOL’s problems are structural. There simply isn’t enough money in the local market to support the huge overhead they created, or the pay scales they offer.

    For a typical local small group of weekly papers pay scales are much more modest. I read elsewhere that Patch pays its sales people $100K a year, even though they only sell slightly more than that. Whichever idiot thought up that pay package really should be fired. In the local newspaper market a salesperson makes about 15% of their sales revenue.

    Now, you guys with the independent local sites, you are much more likely to disrupt my business — if you can find ways to get your readers to actually connect with your advertisers.
    Not having to print and distribute dead trees should give you a fair advantage.

    (We’ll be watching you!)

    1. damianmcglynn
      December 4, 2013

      Patch expected to attract national advertisers to their network of local news sites to give the national guys that “Local” connection that news papers always talked about but could never do mostly due to logistics. For whatever reasom, the bikg boys don’t need local hyper local sites to target locally. Lots of other ways to do that, if they do it at all.

  6. August 12, 2013

    Great analysis. I agree, you have to get the ‘scoop’ and syndicate. Old school with a high tech layer.

    Would be interested to discuss Golocal24 with you as well.

  7. Rich Walker
    August 12, 2013

    I used to work at Patch. I was one of the first 100 sites that launched.

    At first, it was all about doing good journalism. And we were. I’ve written some great stories that have landed me gigs at bigger publications.

    After a while, however, it became less about good journalism and more about becoming a bulletin board, recruiting bloggers (ugh) and creating bite sized content. (They expect seven stories a day, ready and up by 6am)

    I became friends with my superiors and their superiors. You know what they told me?

    “The reason we don’t have answers to some of your questions is because I don’t know the answer and the person above me doesn’t know, either.”

    Nobody knew what was going on. It would have been great if we stayed on the path of being a news site and not something similar to Yahoo groups. It’s a shame, though, because Patch does have talented journalists on staff. They don’t leave because the pay is good, you get a corporate credit card and get to work from home (although, working at Patch is a lifestyle. You are *always* on call).

    They also don’t leave because not much is out there in terms of well paying writing gigs. Most leave the company and do social media, pr.

    Mark my words on this, though – the real blood bath will occur at the end of Q4.

  8. Ex-Patcher
    August 12, 2013

    As an ex-Patcher, I couldn’t disagree more with many of your “lessons” as they make way too overly broad generalizations about Patch. “Journalism Matters” — it did and does for a lot of people who worked and still work there. Certainly, the shift in design and focus toward user-generated content, resulted in less original reporting, but your broad brush strokes fail to capture the many awards Patches have won for quality journalism across the country. And that content brought strong and sustained growth. Secondly, in terms of passion, I never had worked with so many dedicated people willing to go the extra mile in trying to make this model work. Again, the organization is so large, that likely wasn’t true everywhere, but given you are a competitor, you seem eager to attack Patch. Lastly, as much as we like to debate content, the real issue, like another commenter said, is about revenue — an struggle that the entire industry is still working to solve. If Patch has fallen short, it has been there, leading to issues people are now raising about quality. But if Patch fails, it wasn’t for lack of effort or talent, it was about timing — timing of not being able to develop a sustainable, scaleable hyperlocal model before the investors pressured management to cutback and likely pull the plug.

  9. MsC
    August 12, 2013

    Lesson Three is so right. There were towns in the Patch region where I used to work that will never succeed in today’s Patch model. The quality of the work was good, but those communities will never meet management’s engagement goals. The problem is that these towns’ median ages are between 43 and 48 years old. Those older bedroom communities are not going to post unique content, not going to comment, and not going to blog on the scale Patch management wanted.

    1. West Seattle Blog
      August 14, 2013

      Wrong. Age has nothing to do with it. Our audience is older (40+, and I’d say more 50-70 than 40-50) and loves commenting, posting in the forum, sending news tips. You cannot, however, expect anyone to “blog” (which is NOT a verb – you simply mean “write”) for you in a day and age which has already gone through the heyday of personal “blogs” and moved on to Facebook, which is where they do write. As pointed out in the article, the site’s staff must create the compelling content, and then the discussion can riff off that. It’s what works for us, and we are a “bedroom” part of the city. Also to the article’s point about topics, I’ll take issue too … property crime is a hot topic here since we thankfully have little violence; corruption not much of an issue since we are part of the city, without even a district-elected (yet) neighborhood-specific official. All the same, things like new restaurants can draw plenty of discussion – and ongoing issues like redevelopment. Good luck to all .. Tracy

  10. damianmcglynn
    December 3, 2013

    content matters, but the content on Patch was so lame and predictable. If they tried some honest journalism…something like exposing the pensions the local political appointees in town vote themselves, o or reasons they high school added a 10 million dollar theater while cutting back on teachers or why thye library has 20 employees all of whim are related to the ex -,mayor etc. Instead it’s the Time magazine ethos of politically correct banalities to wrap around ads.

Leave a Reply

Your email address will not be published. Required fields are marked *

Street Fight Daily: AOL’s Armstrong Fires Patch Director, Twitter Goes ‘Offline’