David Carr reports today that after investing something like a quarter of a billion dollars in Patch over the past six years—building it into a network of hundreds of individual local news sites across the country—AOL CEO Tim Armstrong has finally agreed to let the company wash its hands of the site. Despite Armstrong's unflagging support, Patch never made money. Investors grew weary. In August, hundreds of employees were laid off, and hundreds of Patch local sites were set to be shuttered. That was not enough to stop Patch from hemorrhaging cash. Now, AOL will look for a buyer who wants all or part of the site network that Patch has built up. It's a step to cut the company's losses. The dream of Patch never came true.
What was wrong with the idea of rapidly building out a huge national network of bare-bones independent local news sites in a bid to grab control of the local news advertising market? A few big things:
1. 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. Instead, Patch decided to blanket the entire country with sites, and hope the grand strategy worked out. Predictably, quality was spotty. The net of successful Patch sites was not strong enough to hold all the failures.
2. Who was Patch's primary competitor? Local newspapers in each market. Does it seem likely that a Patch site with one poorly paid writer will produce a better news product than a local newspaper, even a crappy or dying one? No, it does not seem likely. Therefore it is hard to take away readers from local papers, and therefore it is hard to take away advertising dollars as well. This aspect of Patch's business model was not particularly well thought out.
3. In summary, Patch either needed to invest more in a smaller network of local sites that were actually successful, and expand organically, and cut the unsuccessful sites as they went; or they needed to find a way to spend even less on an even more comprehensive national network of hyperlocal news. The first option would not have satisfied Tim Armstrong's grand vision. The second option already exists, and is called Twitter.
It is still true that local news is a market ripe for the picking. The market is still a vast web of tiny local monopolies dominated by local newspapers which, for the most part, suck. It is inevitable that savvy internet news entrepreneurs will find a way to steal (more) revenue from shitty local papers. But that won't be done with one-person sites that are not so great themselves.