A Bloomberg report published on Tuesday said Patch, the U.S.-wide network of hyper-local news sites and blogs, could be slowly working its way to profitability. Patch, owned by AOL since 2009, has been criticized for both the quality of its content and its business model, which has so far failed to bring in consistent revenue.
AOL has given Patch a pseudo-ultimatum. If it doesn’t break even by the fourth-quarter of 2013, the company will shut it down. (AOL has been advised to do so many times before.) At the same time, AOL CEO Tim Armstrong said on a call with analysts that Patch will break even or be profitable in the fourth quarter.
Armstrong’s confidence (and the title of the Bloomberg article) is a bit misleading; the site will need to quadruple its 2012 revenue of $35 million to break even this year. The cost of operating each Patch site is $140,000 to $180,000. Even if 2013 revenue doubles from the previous year’s to 2013, that will only bring in $70,000 per site, half of what is needed to break even.
Unless significant costs cuts happen. They have already started. The company eliminated 40 staff positions in May and cut 20 regional editors down to nine.
The other hope for a Patch turnaround is ad sales. Advertisers have been looking to shift more of their dollars in to local advertising. Targeting, especially the geographical type, has been the new emphasis of online and mobile advertising. Zipcode-based content such as Patch’s gives that advantage without a need for an extra step of data analysis.
But it will be hard to sell ads when there is low traffic. All of Patch’s sites combined had 12 million unique visitors as of May 2013, the exact number of unique visitors in May 2012. Users who visit describe the local sites and the comments section described it as a “ghost town.”
From a business-model standpoint, Patch’s community-based news that blurs the line with social media should cater to the readers’ need for curation and being part of the news they read. The company re-launched its digital and mobile site in September with features that prioritized users over editors. The new site facilitated community meet-ups, groups and projects. It seems that there would be room in the news and social media world for such a site that focuses on user engagement.
If only there was compelling content to bring them to the site in the first place. And what did not happen with 20 editors will be even harder to pull off with nine.
