Photo: Flickr/Yaniv Golan
AOL CEO Tim Armstrong believes that its local blog network, Patch, will be a “major” part of the company’s turnaround as it fills one of the largest “white spaces” left on the Internet.This belief has us worried about AOL and – not to be rude – Armstrong’s ability to run it.
Let’s start with the amount of money AOL is pouring into Patch each year.
AOL now has about 800 Patch editors nationwide. The number is supposed to swell to 1,000 by year end. Each editors makes $40,000 to $50,000 per year. Add in payroll taxes and some benefits and you have to figure Patch’s people alone cost AOL around $50 million each year.
What is AOL getting for this money?
About 3 million unique visitors per month, according to the New York Times. That is an absurdly small number. By contrast, Gawker Media, with a headcount around 120, reaches around 30 million people each month, according to Quantcast. ComScore says the Huffington Post has 25 million unique visitors each month.
The question that must be driving Armstrong and Patch boss Warren Webster nuts is: Why is Patch’s traffic so low?
Critics attack Patch’s content as “piffle,” too boosterish, irrelevant, or amateurish. All of that may be true, but it’s not the real problem.
The real problem with Patch is that no one needs it.
When Tim Armstrong says Patch is supposed to fill one of the “largest white spaces” remaining on the Internet, what he means is that Patch is a product that tries to solve problems no other company already has.
But is that even true?
In his recent profile of AOL and Tim Armstrong, The New Yorker’s Ken Auletta told the tale of Patch’s origins:
While he was at Google, Armstrong had his revelation about local news. One Saturday morning in 2007, he and his three young children were driving home from a bagel store half a mile from their home, in Riverside, Connecticut. At a stoplight, they pulled over to look at the hand-lettered signs that residents had stuck in the grass to advertise local events. There was no online listing of events in Riverside, and the Greenwich Time lacked a calendar.
Parse this story and we can come up with two things Armstrong wants Patch to be.
- An online place for people to advertise local events.
- A place for a person like Tim “to find out what to do with his family.”
Does Armstrong really think other companies on the Internet aren’t already successfully addressing these needs? We can think of two that are.
The first is Facebook.
Facebook has over 600 million monthly active users. 250 million of those people make Facebook’s “News Feed” their homepage and return to it every single day.
Patch is supposed to be a local news outlet, but Facebook is already giving people the local news they actually care about. It has the local events Armstrong wants Patch to report, but also observations from friends, and photos that are better than any society pages.
Patch is trying to disrupt the newspaper business by, in Clay Christensen’s words, giving local news consumers something that is not “better” but “good enough” at a much cheaper cost to the product’s producer.
Turns out Facebook is already giving them something that’s “good enough” but at even cheaper cost. Facebook has just 2,000 employees to Patch’s 800.
The other big successful company crowding out Patch’s supposed “white space” is Groupon.
In Patch, Armstrong wanted to create a product that told him “what to do with his family.” Everyday, Groupon sends an email to 50 million people giving them things to do in their cities.
Unlike Patch, Groupon gives its subscribers a huge incentive to look at these “things do to” by sending out the news in the form of a coupon that makes these things cheap to do. Unlike Patch, founded years before Groupon, the business is going very, very well. It’s set to IPO for $15 billion later this year.
So what is AOL to do, now that we know there isn’t a “white space” for Patch to fill?
Four million subscribers give AOL $244 million each quarter. The safest, perhaps smartest, thing for Tim Armstrong and his board of directors to do is to fire everyone at AOL but the people who keep that money coming in and then pay out its profits as a dividend to shareholders.
But that’s boring not something someone with big ideas like Armstrong’s would ever do.
We reached out to AOL about the ideas we wanted to present in this story and never heard back.