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Between August 2013 and January 2014, I interviewed more than a dozen current and former employees of AOL Patch. Their stories form the basis of this case study on the AOL Patch hyperlocal online news network and its business failings and successes. This is the second in a series of articles that look at multiple aspects of the AOL Patch business model.

Previous Posts: AOL Patch Insiders Know How to Build it Better by Michelle Ferrier

Hundreds of AOL Patch editors were laid off last Wednesday after AOL turned majority control over to Hale Global just two weeks ago. The story of how one of the hyperlocal online news spaces’ most talked about experiments ended in a bloodbath – for editors, for readers and for communities – is a complex one. However, there is one strategy that both editors and AOL insiders agree doomed the mission. I call it the “land grab.”

 “We will be too big to fail.”

After AOL bought Patch in 2009, management decided to ramp up the number of sites.  In a meeting in November 2010, editors were told that AOL wanted a 1,000 Patches by the end of the year. One editor recalled the meeting at headquarters in New York. One of the top execs said “We will be too big to fail.”

Patch squarely landed on the back porch of established New Jersey hyperlocal news sites Baristanet.com and thejerseytomatopress.com, independent online only sites that had grown to serve communities in New Jersey. However, these independents were among many hyperlocal online news sites cropping up all over the country as newspapers retrenched their efforts in the wake of declining ad sales. And AOL noticed.

More than 100 independent hyperlocal news founders gathered for the first Reynolds Journalism Institute Block by Block summit in Chicago in September 2010, to provide support to fledgling organizations, to share business strategies and to find strength in numbers. Some Patch representatives were there. I was there too.

I remember those early days as a hyperlocal publisher of LocallyGrownNews.com. Independent hyperlocal online news publishers warily watched LoudounExtra.com, VillageSoup, BackFence and other experiments cropping up from more established media organizations and startups hoping to capitalize on the local advertising space. And Patch, it seemed, was sprouting in all the same places as some of the more successful independents bringing unwanted competition.

“The competition didn’t take us seriously unless we were beating them to a story,” said one editor. Another editor told me that independent hyperlocals hated Patch with a passion. And to be honest, the feelings were mutual, he said. “Patch thought it was the next big thing and looked down on traditional journalism.”

“I thought launching with 900 sites was absolutely nuts.”

Patch grew to more than 800 by the end of 2010. AOL was feeling pressure from investors to get revenue from Patch and to do that AOL required a large, distributed network of sites to aggregate eyeballs. The sheer number of sites would allow AOL to sell to national advertisers to offset the money they were losing on local advertisers and their main expense — labor costs. But it put them in the position of making bad decisions like launching in places where they shouldn’t have. The logic was seemingly sound: “The bigger our footprint, the better chance we have of attracting national advertisers.” The thought behind the scenes in the New York HQ was to stave off hyperlocal online news competition that was cropping up across the country.

While hyperlocal hasn’t been well defined, one working definition of a hyperlocal is “online news or content services pertaining to a town, village, single postcode or other small, geographically defined community.” However, many Patch editors saw problems, as they saw little rationale to how AOL determined which communities would receive a Patch site. To many editors, it seemed like management in the New York headquarters just randomly selected areas from socioeconomic data without a clear understanding of what makes a community a community. Others believed they launched in areas where they could hire a decent editor, not because the demographics at all.

“They opened far too many sites in towns that couldn’t sustain a site. The towns I initially worked on were not big enough to generate revenue. They opened sites in places where they could versus should,” said one veteran Patch editor.

“They said they were focusing on communities with certain characteristics: strong school district, good socioeconomic status. I don’t know if that was the case everywhere.”

Another Patch editor ran a site for a town of 10,000 residents.

‘They went expansion crazy and a lot of sites were a waste of time. There was this one town where nothing was happening. I would write the same articles – everything the townspeople talked about were parks and sewers. Stories like: The town is looking for land for a park. The town has found land for a park. The town council is looking at the land today. The town is buying the land….the same stories different verb.”

Some Patch sites were given names that were not representative of the communities the site covered. Others were too big, covering multiple towns and large populations of residents, contrary to the model of “hyperlocal”. And AOL went into some markets like Iowa and other swing states for the political season, not because of its viability as a designated market area with potential for advertising revenue.

“They saturated the whole country with Patches and dealt with the avalanche of problems,” said one editor. And that’s pretty much how NY headquarters saw it – they were building the plane and its route to sustainability while it was flying.

“I would have closed 300 sites a year ago.”

One Patch editor believed that if AOL was engaging in a land grab, they made one strategic mistake.

“They shouldn’t have left gaps in places like New Jersey. They should have grown in places where they had a presence. Why push into South Carolina or Milwaukee? There were a lot of areas that were questionable. It spread the organization too thinly.”

One editor thinks staffing cuts should have come much earlier, after the political season was over and before the second round of layoffs in August.

“I would have closed 300 sites a year ago,” she said.

So what would former Patch editors do differently? According to several, a successful Patch is one that has:

  1. A city government
  2. A parks system
  3. A chamber of commerce
  4. Its own school district
  5. A size ranging from 20,000-40,000 residents

They would have selected Patch names that were drawn from community identity more so than a geographic marker. They would have made sure the editorial talent actually lived in the communities they covered.

What also helps, some say, are a few natural disasters thrown in like Hurricane Sandy and Irene or a flood. And an advertising sales team that is as local as its editors. But ultimately, the house of cards collapsed under its own operating weight before AOL could figure out the business model.

Because Patch never had to bootstrap its way to success. It could feed off the largesse of its parent company and it burned through $300 million in the process. I don’t believe what many say that “local doesn’t scale” and the AOL Patch takeover by Hale Global represents a point of evidence in that argument. I believe other models such as the franchise model, the cooperative model and the nonprofit model may still be viable as experiments in the hyperlocal online news space.

So what’s left after the Hale Global takeover? The good news: 125 local editors still have their jobs. They are in local markets that were able to excel in unique visitors, community engagement and local revenues. Hale Global was able to jettison the huge organizational structure it inherited with 60 percent of Patch ownership that was burdening their ability to move forward with a leaner organization, profits out the box…and enough runway to reimagine the network of less viable sites.

But while the business types talk pivot and startup and new editorial strategies, we still see zombie Patch sites lumbering across the local landscape, surviving on aggregated content, Patch maps and whatever user-generated content they can get.

One local editor lamented what was happening to the Patch that he and several others built out of their passion for their community and journalism.

“We have sites in the middle of nowhere that they are probably shutting down. Which is sad for those local people because that is their only source of news. A lot of these towns haven’t had a newspaper in 20 years. They had to rely on the next big newspaper next door. And maybe, once in a while, they would be covered in the newspaper,” he said.

Will AOL and Patch get credit for one of the biggest experiments in community journalism? Probably not. Not unless Hale Global can turn around the negative public relations in communities that have been hardest hit by this latest setback.

“Readers love their local Patch because they were getting news they hadn’t gotten. I feel sorry for the local editors, but also the readers…we really spoiled them a lot.”

CORRECTION: 110 AOL Patch employees remain, including some local editors, sales people, developers and management. February 11, 2014: Source: AOL Patch employee. AOL Patch reached 767 sites by the end of 2010, not 800 as originally reported. Source: Former AOL Patch manager.

Dr. Michelle Ferrier is associate dean for innovation at the Scripps College of Communication, Ohio University. She has been tracking hyperlocal online news and AOL Patch on two wikis: Hyperlocal Online News and AOLPatch. She is a pioneer in new media, particularly online communities and hyperlocal online news and is the publisher of LocallyGrownNews.com. She can be reached at ferrierm(at)ohio(dot)edu or on Twitter @mediaghosts. This series will preview here weekly at michelleferrier.wordpress.com.

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