AOL to Close 400 Patch Sites
It was an ambitious project to begin with, but it seems as though AOL has decided that after years of mediocre success with hyper-local news, that they will begin to shut down many of their Patch sites. The fateful news came down earlier this month during a meeting with nearly 1,000 Patch employees when AOL Chief Executive Officer Tim Armstrong announced the changes.
The Patch sites, which cover town hall meetings, local business and school board meetings, launched in 2007 with plans to penetrate the hyper-local news business by opening small publications throughout the country. At the time of the announced closings, Patch operated in 23 states with over 900 sites.
Armstrong attributed the fast paced growth of the sites as one of the reasons for their inability to succeed. The over-development of the company wasn’t supported by demand and AOL began to hemorrhage millions of dollars due to the venture.
AOL invested more than $300 million in developing the sites but has been unable to turn the project into a profitable business. Last year the sites earned just shy of $35 million from advertising revenues, their highest earning year to date, but the cost to maintain the sites ranges from $126 million to $162 million annually.
AOL is in the process of trying to find partner sites for many of the 400 underperforming Patches but will pull the plug if no partners can be found. AOL will not be wasting much more time with trying to match unsuccessful Patches as many having already been closed. The remaining 500 Patch sites will continue to operate for the time being and Armstrong didn’t mention whether there were further plans to close the more successful and semi-profitable sites.
While the Patch closing garnered a substantial amount of media attention after the announcement, it was the public firing of an employee during the meeting that seemed to be the headline story for most publications.
Armstrong fired Creative Director Abel Lenz on the spot for taking photos during the meeting. After the unexpected termination, business continued as usual as Armstrong addressed the crowd.
Not long after the news of the massive closings, AOL executive Steven Kalin announced his resignation from the company. Bud Rosenthal will act as the interim chief until a permanent replacement can be found.
This low period for the publications isn’t the first brush with criticism the company has faced.
Since its inception, the company has received a substantial amount of condemnation for their unstable business model. Articles appeared in the Los Angeles Times, Business Insider and Forbes, which attacked the company for having an unrealistic expectation for their future.
When former Editor-in-Chief Brian Farnham resigned in April 2012, he said “I’ve never worked for a company that has been as scrutinized, criticized, and coal-raked as this one.” He continued to say, “You’d think we were creating toxic waste, instead of, you know, free useful information.”
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