Wednesday, June 19, 2013

Can AOL Make Patch Profitable?

Local was once the battle cry of cable operators.  To compete against the national, not in your backyard, satellite companies, cable operators touted local offices, local management, and local participation and pr in neighborhoods in which they operated.  And while some of that pr still remains, cable operators recognized that to be more profitable required economies of scale, regional offices over local, and national campaigns over regional ones.  Costs through consolidation were reduced and profits increased.

AOL's entry in local neighborhood news faces similar stumbling blocks.   Costs to manage sites on a local basis are both expensive and time consuming and the real ad dollars come from bigger buys.  You can try to aggregate all the sites into one number but it hardly beats one site with the same results.  "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."  I am a fan of Patch; I check it out a couple times a day for local info on the community.  But I have found that the quantity of local news has decreased in favor of more regional news, making the site less relevant at times.  Can Patch be both local and profitable?

Consumers and users care about the former, stockholders about the latter.  And that is the conflict.  Can Patch be both relevant for the communities each site serves AND a revenue producer for the company?  One hopes that the better the quality of the content, the more clicks the site will get, and the more ad revenue it will return.  But the costs to drive content creation in each individual community must be high and so the ROI to pursue better content appears unlikely.   Companies like AOL, seeking to get to profitability, have to do what cable operators and others have done, cut costs through consolidation and raised prices on ads on the sites.  "The push for profitability has forced Patch to put single editors in charge of multiple sites, increasing burnout."   But I fear that less relevant local stories on these sites will only go to reduce its value and lower clicks.  A lose-lose scenario if ever there was one. 

I am a believe in Patch and only hope that they invest in more local content, partnerships with local and regional newspapers, and town governments.  Add more revenue opportunities through e-commerce and continue to pursue the local connections.  For me, Patch has become a resource to the neighborhood and one that I would hate to see go away.

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