After more than five years of reporting on school-board meetings and community bake sales, AOL Inc. (AOL)’s Patch is now at the center of another story: whether the company’s bet on local news can be profitable.
Patch, with more than 900 sites supplying news to communities or neighborhoods, has become a test case for both the online-news industry and AOL’s ability to transform itself from a dated dial-up service to an ad-driven Web publisher.
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Following investor complaints that Patch has been holding back AOL’s turnaround, Patch now faces a do-or-die year in 2013, said Benjamin Schachter, a media analyst with Macquarie Securities USA Inc. in New York. If the company can’t make Patch profitable, it may close down the division, he said.
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At the same time, Patch is cutting costs elsewhere.
It eliminated 40 staff positions last month, a person familiar with the move said at the time. Patch also collapsed the editorial structure, reducing the count of 20 regional editors down to nine. Still, the business will need sales to at least double this year to be profitable -- even assuming AOL slashes Patch’s budget in half.
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The embrace of social media can lead to some questionable content.
A February post from a Patch blogger in Avon Lake, Ohio, said that deer crossing signs in her neighborhood were a waste of taxpayer dollars because “deer cannot read.” The item became fodder for blogs such as Gawker to mock Patch.
