Fate of N.H. Patch sites up in the air

AOL hasn’t announced whether any of the underperforming sites include any of the dozen in New Hampshire

The 13 New Hampshire employees of Patch will be on tenterhooks this weekend, as AOL figures out what to do with some 400 underperforming hyperlocal news websites nationally, according to the latest word from CEO Tim Armstrong Friday morning.

The bad news is that's 100 more underperforming sites than were announced last week, when 300 were said to be underperforming. AOL hasn’t announced whether those sites include any of the dozen in New Hampshire. Attempts to contact several editors from Patch were unsuccessful.

The impacts on these sites and the editors who run them will be announced on a rolling basis next week, Armstrong reportedly told editors Friday. It could include closing the sites, selling them, or partnering with traditional media. Some of the editors could be without a job.

The New Hampshire Patch sites cover local news in larger markets such as Concord, Nashua and Portsmouth, as well as smaller towns, such as Milford, Exeter and Windham, but all might be considered smaller markets compared to sites in major city neighborhoods. Each editor has one or two sites.  There are also a few regional editors and two advertising sales people.  

AOL bought Patch in 2009 for $7 million and reportedly pumped at least $70 million into it the following year, and an unknown amount in 2010. At the end of last year, it had some 900 sites open, including a dozen in New Hampshire, most of them rolled out in 2011 to coincide with the 2012 presidential election. But last year AOL cut back $26 million of spending on Patch, according to AOL’s annual filing with the Securities and Exchange Commission. 

'Signs and signals of being successful'

In a conference call last week AOL Armstrong said that it significantly slashed spending from its peak of $150,000 a site about year and a half ago.

“We have decreased the cost structure of Patch roughly 25 percent already this year,” Armstrong said. “And we would expect to remove more costs out of Patch going forward.”

The company is partially doing that by segmenting “all the Patches into three buckets. First bucket is established and successful Patches; the second bucket is emerging Patches that have all the signs and signals of being successful; and the third bucket is a set of Patches that may have traffic or revenue traction, but don't have both.”

That third segment, about 300 underperforming sites, the company had planned to either sell off or partner with traditional media, he had said last week.

Already, in New Hampshire, Patch has gone from some 11 local journalists – called editors – covering 10 sites to eight handling 12 sites, though AOL did add another sales person. Patch reporters sometimes complained that they were forced to resort to crime stories, or quick-hit rehashes of stories reported in other media, in order to generate traffic, as opposed to reporting on local issues that not as many readers clicked on.  The websites also relied more on free bloggers – many with an agenda to promote – in order to fill up the sites with content.

The further reductions won’t increase traffic in the short term, Armstrong had warned, but will help AOL make money.

“As an investor, you should recognize that the changes we are making to Patch will negatively impact traffic and revenue, but they will meaningfully improve profitability and AOL's profitability,” he said.

Still he said last week, “We remain fully committed to Patch as a solution for connecting hyper-local communities.”