Is Patch in a tailspin?

Faith Merino · June 9, 2011 · Short URL:

A Patch employee points to flagging sales and poor leadership that are dooming the company's future

When you look at Patch’s structure, it really makes you wonder how it’s managed to survive this long. Most businesses strive for fewer employees and more effective product distribution, while Patch seems to be aiming for the exact opposite. And now it would appear that Patch is starting its slow spiral down the drain, according to one anonymous sales executive who spoke with Business Insider about the company’s poor health.

The exec, who described herself as a “disgruntled employee,” revealed that Patch sales are miserably low. Meanwhile, the editorial staff is overworked and has already gone through one full changeover. As a result, employee morale is low.

So what’s responsible for the falling sales? A price increase for a mediocre product, according to the anonymous exec. Patch recently raised its rates by 10% to 20%, but the exec notes that the problem with Patch is that it’s essentially selling brand advertising campaigns for smaller businesses that shouldn’t be putting their money into brand advertising right off the bat. To make matters worse, Patch relies on banner ads, which are an old horse, just with a new trick: local.

In summary: “The advertising cannot support the local Patch model the way it stands.”

This shouldn’t come as a surprise to anyone when you consider the fact that Patch is employee-heavy and product-light. As a hyper-local news source, Patch has 800 different individual sites throughout the U.S.—each with its own editor and writing staff.  AOL hopes to expand Patch to 1,000 sites by the end of the year—which translates to a total of 1,000 editors and even more writers.  Analysts estimate that this will cost AOL some $120 million, which wouldn’t be a big deal if Patch was drawing big numbers, but that’s not the case. The entire Patch network combined sees just under 7 million monthly uniques. 

To put it bluntly, the Patch model doesn’t add up, but it’s near and dear to Tim Armstrong, who sees it as a solution to the disappearance of local news publishers. Armstrong has claimed in the past that Patch will be the key to AOL's turnaround, and as the former CEO of Patch before becoming the head of AOL, I'm sure Armstrong believes this to be true, but that doesn’t change Patch’s innate structural inefficiency.

The sales exec concluded that poor leadership is at the heart of Patch's issues, with the wrong people in leadership roles (which, to be fair, every disgruntled employee says).

Patch declined to comment. 

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