The Wall Street Journal
AOL is spending heavily on content, the Journal reports, with its second-quarter results showing that its “cost of revenue increased 20% from a year earlier to $403.4 million.” Included in that cost is hiring for the network of Patch sites:
AOL is spending about $160 million a year on Patch, which equates to about $150,000 to run each individual Patch site annually, according to an analyst’s estimate. AOL first focused on building traffic to Patch sites, and just recently started ramping up ad sales. …
Boosting traffic is crucial to capturing ad spending.Traffic to AOL sites rose just 3% in June, according to comScore Inc., with increases to its newer properties, such as the Huffington Post and local Patch websites, barely making up for steep declines at its legacy sites, such as the AOL.com home page and mapping site MapQuest.
One analyst questions the business model: “If you sell lemonade for $1 and it costs $800 to make it, that’s not a great business.”