AOL CEO Tim Armstrong revealed last week that he’s finally given up on his baby: Patch, the network of “hyperlocal” online news sites. The site never turned a profit and the company laid off hundreds of employees and shuttered half of its sites this past summer. AOL now hopes to find a buyer.
Media analysts say AOL and Armstrong could have been much smarter about how they built Patch in the first place. In their analysis of Patch’s downfall, there are three important lessons for business owners to glean:
1. Don’t grow too quickly. Patch’s ambition to be the go-to source of local news in hundreds of U.S. communities compelled AOL to invest billions of dollars quickly without understanding the unique factors and challenges in each market. Instead of growing the company organically and learning from that growth, the company assumed it could plunge millions of dollars into local markets and quickly reap success. “Patch did not try to start small and build up, which would have allowed them to make sure that individual sites were profitable and had a strong audience before trying to grow,” writes Hamilton Nolan of Gawker.
2. Find the right profit model—and be innovative about it. Patch relied on traditional local advertising—a tough sell in recent years given the poor economic climate and businesses’ interest in other forms of marketing, such as social media. Patch wasn’t very innovative in how it tried to make money. “What Patch could have done was sell not only a network of local sites with more audience, but also a menu of digital services to local advertisers,” writes Jeff Jarvis on BuzzMachine. “Our research at CUNY shows that local merchants need more than ads; they need help with their digital presences in Google, Twitter, Facebook, YouTube, and so on. That’s what I’d like to see local sites working on now.”
3. Do something different and new. Patch essentially produced everyday community news stories except published online with a few more bells and whistles. Its writers and editors cover local crime, city council meetings and local news, but its coverage didn’t push the envelope or try to break stories or launch investigative features that could go viral or get nationwide coverage. “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,” wrote Josh Fenton, co-founder of GoLocal24, on StreetFightMag.com.
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