AOL’s hyperlocal network Patch is struggling.
It was supposed to be a savior. AOL’s hyperlocal news venture Patch was created to fill the void left by the death of local newspapers around the country. Finding a dearth of online news in his Riverside, Connecticut hometown, Tim Armstrong co-founded Patch in 2007. Embedded editors would file local news and maintain neighborhood activity calendars; the local ad market was largely untapped, or so went the thinking…
…The math around Patch has always been tricky. In two years, it rapidly expanded to 863 sites, from Agoura Hills, California to Woonsocket, Rhode Island. Content is supplied by 1,000 professional journalists and some 14,000 bloggers. AOL has poured $160 million into the venture, despite paltry revenues. In 2011, it made just $20 million from Patch.
AOL likes to say that Patch losses aren’t really losses but instead necessary initial investments for a profitable longterm future.
But is there a longterm future in hyperlocal?
Bob Garfield, co-host of NPR’s On the Media, believes the answer is two-fold. There isn’t a market for independent hyperlocal sites, but there is one for a consolidated network of them, which is exactly what Patch is.
Simply, there’s too much audience fragmentation and downward pressure on advertising prices for the independent operator.
"Nobody, nobody, will have the critical mass to professionally and profitably deliver [hyperlocal] news," he says in this interview (video, starting at 2:30) with Borrell Associates. “The future isn’t in hyperlocal, per se, as a stand alone operation. In my opinion, the answer will be in consolidation.”
Alex Salkever of Street Fight thinks Garfield has it wrong. While agreeing that the economies of scale won’t allow hyperlocal sites to exist on traditional online advertising, innovative new forms might do the trick.
"With Twitter and other real-time microblogging tools," Salkever writes, "merchants can integrate hourly deals into the local blog spots in order to, say, take advantage of bad weather (BOGO hot cocoa at the local coffee shop, anyone?)."
This is very true and the hyperlocal site of the future will probably look very different (in both interface and delivery platform) than what we think of as traditional new sites. But I think Garfield’s final point still stands: that the future of hyperlocal may very well be consolidated national brands like Patch.
Salkever counters that mom and pop tech blogs with lean staffs and a whole lot of daring do punctured the tech coverage of the mainstream press to become some of the biggest players out there but that analogy is a little bit apples and robots.
People who follow tech are going to follow whoever’s producing the best news about it. There’s no geographic constraint on where that news is important or interesting. People following local high school sports, or town council meetings? Except for a very interesting few, they aren’t heading to other hyperlocal sites to see what’s new about a random town’s residential zoning issues.
So, Patch is wounded but it has built scale. Now we’ll see if it has the imagination to make it sustainable. There are, after all, upwards of a thousand journalists whose current jobs depend on it. — Michael