AOL will close or sell unprofitable Patch sites

Forbes | Street Fight

In AOL’s earnings call, CEO Tim Armstrong talked about Patch, revealing “how he plans to keep his promise to make the network of local news websites profitable by the end of 2013: by closing, selling or finding partners for the 300 or so Patch sites that, in the company’s estimation, aren’t on a course to break even anytime soon,” Jeff Bercovici reports.

Newspaper sites may be potential suitors, Armstrong said in Bercovici’s account.

Armstrong didn’t say exactly what Patch’s revenues or costs would look like after disposing of the bottom third, but, in response to an analyst’s question, he did say that the average cost of a Patch site is “much, much lower” than the $150,000 it peaked at two years ago.

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Revenues rise at AOL, 21st Century Fox

AOL | The Wall Street Journal | 21st Century Fox | The New York Times

AOL is buying the video advertising platform, it announced in its second-quarter earnings report Wednesday. The acquisition “will make AOL a clear global leader in the most important growth segment in our industry — online video,” AOL CEO Tim Armstrong said in a statement. Advertising revenue at AOL was up 7 percent over the second quarter of 2012.

Revenue at AOL’s Brand Group, which includes content properties like The Huffington Post and Patch, was up 10 percent over the second quarter. The report does not break out financial information on individual properties. Unique visitors were up 3 percent at AOL properties, the company says:

21st Century Fox, which includes the cable-TV and television businesses once part of News Corp., reported a 16 percent increase in revenue over the fourth quarter of 2012. “Cable, as always, drove the company’s growth,” Brian Stelter writes in The New York Times.

Subscriber fees rose 9 percent in the United States for channels like Fox News, FX and National Geographic. As is the norm for major media companies these days, growth was much more pronounced overseas. That was true for advertising sales, too: sales were up 4 percent in the United States and up 20 percent internationally.

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Patch gets new CEO, lays off staffers

All Things D

Steve Kalin is Patch’s new CEO, AOL CEO Tim Armstrong told Patch employees in an email Friday. Patch will also make several motions that Armstrong writes will “move Patch meaningfully toward profitability.” Among them: layoffs.

The changes we are making at Patch, however, come with the difficult decision to eliminate some positions. These employees have contributed greatly to Patch’s business with passion and dedication. We sincerely thank them for all they have done to make Patch what it is today. Their impact will always be felt here. We wish all affected employees continued success. They are truly Patchers for life.

Via email, Patch spokesperson Joe Wiggins replied affirmatively when Poynter asked whether editorial jobs would be among those going. He sent along this statement:

Patch is streamlining its regional editorial structure across the country by moving from 20 to nine teams. We are implementing this team approach based on the success of our field tests earlier this year. The team approach allows for flexibility based on the unique needs of each community and the strengths of our editors. We are not reducing our number of sites or our coverage area as a result of this change.

Making these important changes came with the difficult decision to eliminate some positions. We recognize these changes are painful for individuals and for our organization – and we are committed to handling the people impacted with care and sensitivity.

The company will host a “Patch All-Company call” at 6 p.m. ET Friday.

Last fall, Patch began rolling out a new site design. The new design means editors will be “taking a less central role,” Laura Hazard Owen reported at the time. “We’re not doing a pivot,” Patch content honcho Rachel Feddersen told Jeff Bercovici. “This is an amplification. The redesign doesn’t take anything away from the journalism we’re creating.” Read more


Ad revenue, traffic up at AOL in third quarter

AOL | All Things Digital
Total revenue was flat over 2011, “representing AOL’s best year-over-year revenue performance in 7 years,” the company says in an earnings release. Advertising revenue was up at AOL during the third quarter of 2012, rising 7 percent from the same period in 2011 to $340 million. Read more


AOL says Patch continues to double its revenue from last year

AOL | All Things D | paidContent | Ad Age
In its second-quarter earnings report, AOL says Patch “grew traffic and engagement at double digit rates year-over-year and quarter-over-quarter” and that revenue more than doubled in the second quarter compared to a year earlier. Patch is on track to make $40 million to $50 million this year, though it has invested more than $200 million so far, according to paidContent’s Staci Kramer.

The company reported in May that its first-quarter revenue was double that of last year’s, too, and that its traffic was up 55 percent from March 2011 to March 2012.

In an interview with Ad Age’s Jason Del Rey, AOL CEO Tim Armstrong described an upcoming shift in Patch’s strategy, expanding from its current focus on hyperlocal news to listings and commerce.

As for the listings business, he was asked if Patch was trying to build a competitor to Craigslist. “Craigslist and other companies like that that sell used merchandise haven’t really scaled into communities,” he said. “They’ve been very metro-focused. One of the opportunities for Patch…is the ability for us on the commerce side to offer the people the ability to do listings and other things like that locally.”

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Starboard loses bid to place members on AOL board

Starboard, the activist investment group that expressed great skepticism about AOL’s content-based strategy, lost its bid to place three members on the company’s board at today’s annual meeting. AOL’s entire present board was re-elected, a company news release says.

This may mean some more breathing space for Patch, AOL’s local-news initiative, which would have been in the crosshairs of any Starboard-affiliated directors. Starboard prepared an investor presentation for the SEC saying it did not believe Patch was a “viable business,” estimating it was losing “approximately $79 million to $133 million per year.”

Related: Patch reports record audience as AOL faces proxy fight Read more


AOL doubles down on Web-to-magazine model with launch of ‘Huffington’ for iPad

New York Times | Mashable | Capital New York

This free preview issue of Huffington magazine will come out Thursday.

The Huffington Post launches an iPad magazine on Thursday called “Huffington,” building on a Web-to-magazine publishing model AOL pioneered with Distro.

The weekly publication will offer a slower pace than the website, anchored by a few long-form journalism pieces (4,000-8,000 words), plus commentary, photo essays and data visualizations. It will largely resemble a Newsweek-style print magazine, Lauren Indvik reports. But it also will have digital enhancements like article commenting, sharing, and (gasp!) outbound links. Read more


Patch reports record audience as AOL faces proxy fight

Patch | The Wall Street Journal
Patch reports today its audience is up 14 percent over last month, with 11.7 million users in May, and that its revenue is up 17 percent over the same period. This news comes at a propitious time for AOL’s ambitious local-news initiative: Thursday’s annual AOL shareholder meeting will be a showdown between CEO Tim Armstrong and Starboard Value, the activist investment group that’s been calling for the corporation to change its content-focused strategy. “We do not believe Patch is a viable business,” Starboard wrote in an investor presentation it’s filed with the SEC. It estimated the local-news initiative is on track to lose “approximately $79 million to $133 million per year.” Starboard is hoping to elect three directors to the company’s board at the meeting.

Keach Hagey reports in The Wall Street Journal that AOL’s been catching some tailwinds that might blunt Starboard’s attack. Its stock is up 43 percent following a sale of patents to Microsoft, and much of its equity is held by long-term investors (who might nonetheless get twitchy if a frustrated Starboard sells its 5.3 percent share in the company, Hagey writes) for
torrent proxy

Previously: AOL reports Q1 earnings with progress for Patch as rumors swirl it’s selling tech sites Read more


AOL reports Q1 earnings with progress for Patch as rumors swirl it’s selling tech sites

MarketWatch | All Things D | Pando Daily | The Hook | GigaOm
AOL released its first-quarter earnings today, posting a 5 percent rise in advertising revenue and a 14 percent drop in subscribers to its Internet access business compared to the first quarter of last year. Domestic display ad sales declined by 1 percent, which Peter Kafka says will be “fresh meat for AOL critics” like investment firm Starboard Value, which believes content is “a high cost strategy,” that requires “substantial in-house editorial and sales personnel.” It also says it thinks AOL’s Patch has a “structurally flawed business model.”

AOL’s first-quarter report says “Patch grew traffic and advertisers over 40% year-over-year and revenue over 100% year-over-year.”

During a conference call Wednesday morning, AOL CEO Tim Armstrong said that “there’s a lot of noise about Patch” but it remains “a very long value proposition for us.” Patch has already booked revenue for 2012 that exceeds revenue booked in 2011 and will be profitable by the end of 2013, in part by lowering expenses, he said. Expenses have been lowered as town and regional staffs have “smartly organized the editorial process.” Armstrong also said Patch is planning a new product. Despite that growth, Kafka notes that “Traffic is down 4 percent to AOL’s own properties over the last year.” Armstrong said that in the first quarter total unique visitors grew, in particular at Huffington Post, Moviefone, Patch and AOL Autos. Huffington Post, he said, had one billion page views from Jan. 1 through March 31. Accompanying information, though, shows unique visitors at AOL properties are down since the second quarter of 2011, when it reported 113 million uniques; this quarter the company reports 108 million. Read more


AOL websites give best stories a second life in weekly iPad magazines

The mobile team at AOL is finding success with a new publishing model that plucks the best longform and enterprise writing from an otherwise fast-paced website and republishes it in a design-rich tablet magazine.

Distro is a free weekly tablet magazine that refreshes Engadget’s best original reporting in a premium design package.

Their first venture is Distro. The iPad and Android magazine app pulls feature content from the tech blog Engadget.

Most of the 40+ daily Engadget posts are short breaking news, but a couple a day might go deeper: analysis, product reviews, trend stories or interviews. That’s the stuff that finds a second life each week in Distro.

There are several positive signs, AOL vice president of mobile David Temkin told me. Readers spend an average of more than 10 minutes with Distro each session, while the average visit lasts less than one minute. The app has extremely positive user reviews in iTunes. And it’s attracting readership in the same class as “actual, popular print magazines” such as Wired, Temkin said.

“I can’t share the absolute numbers, but if you were to look at the number of people who read Distro on a weekly basis… if this were a print magazine, this would be on the map,” he said. “We came out of nowhere, and it’s now very real.”

After piloting Distro for about six months, AOL is now looking to expand the model. It is working on a similar free weekly iPad magazine — codenamed  “Huffington.” (with the period) — based on Huffington Post content.

“We have certain other sites that in a way resemble Engadget in terms of their very high volume of postings, some smaller number of which lend themselves to a lean-back reading experience or a higher-bar presentation,” Temkin said. “So you could imagine us expanding this to those content properties at some point.”

Defined by design

Distro includes new visual content that didn’t appear online.

Although the words themselves are republished from blog posts, everything else in Distro is tailored to a unique tablet experience.

The magazine adds some original content like infographics and a weekly editor’s column. Two or three staffers design and illustrate all the pages — none of the layout is automated.

Former TechCrunch blogger M.G. Siegler wrote that the design is what appealed to him most about the Distro concept:

“One thing I’ve never liked about content on the Web is that 99% of it looks like absolute shit. There’s plenty of good content (including pictures), but it’s often wrapped in an ad-heavy shit sandwich — TechCrunch included.

I would love to see my best content wrapped in an elegant package, like a beautiful magazine.“

Headlines are rewritten in magazine style as well, dropping SEO keywords in favor of whimsy and wordplay. Distro’s March 23 cover story is “Pixel Perfect? Apple’s new iPad goes high-res,” which was polished quite a bit from the Web version headline: “iPad review (2012).”

‘It feels like something that you pay for’

The content model seems to be a hit. The question for the long term will be profitability.

Temkin said one lesson has been that Distro functions much more like a print product than a website. That means AOL faces the opposite challenge as newspaper advertising staffs: a digital-minded sales team and digital ad buyers who are unfamiliar with print marketing dynamics.

“We have some homework to do. The good news is that we’ve built an audience, and we have a very high-quality product and the metrics are great,” Temkin said. “The bad news is that this isn’t really like anything else that we sell.”

Distro is free to read, and the forthcoming “Huffington.” magazine will be free as well.

“At this point we have a free product [Distro] — that’s what the audience expects, that’s how it was launched,” Temkin said. “On the other hand, I would argue one of the reasons people really like this product is it feels like something that you pay for. Could something in this general area be a paid product? We think, yes.” Read more


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