Monday was Patch day in the news world, as Aol (AOL) formally announces the expansion of its network of local sites. It’s really a ratification of what we’ve been hearing, as CEO Tim Armstrong stakes his reborn company’s future on professional news content creation, here, specifically local. The number bandied about: $50 million in investment in Patch, resulting in 500 local sites across 20 states by the end of the year. It's a 59-variable algorithm, of course!
“Patch expects to be the largest hirer of full-time journalists in the U.S. this year,” says the Aol release.
Let’s put this Patch push into perspective. About 400 new sites, spread out across the country. Five hundred new journalists being hired. Let’s remember, though, that this is one journalist per community, communities that range in size from 10,000 to 80,000 people. One journalist per community.
The fact that Patch is getting such recognition, and discussion, is another indicator of how thoroughly journalism has fallen on hard times. The announcement of the hiring of a single journalist in a single community? That was the stuff of internal newsroom memos not too long ago. It’s as if the news industry is struggling to rebuild itself, cell by cell, just as researchers are figuring out how humans themselves can regenerate lost limbs and organs.
Still, we should take the news as good news. The more journalism, the better — especially if it can be sustained. Now-independent Aol, though, is a profit-seeking company, at the moment chastened a bit by its just-released quarterly earnings report. Patch has lots of promise, but it will have a tough slog to profitability, as mano-a-mano battle for local ad dollars only intensifies.
As we parse the Patch news, here are a beginning nine questions about the initiative:
1) If this is a big national, hyperlocal play, is that oxymoronic or does scale really help? It seems to me that scale is a plus in a couple of ways: 1) national ad sales (witness the Pepsi Refresh campaign running across the current sites) and 2) technology costs, with one centralized production and presentation system, one that should be able to get to market quicker with tech innovations. In two important ways, though, scale will be of a lot less help — and these are core to the site’s promise and success: 1) local content production and 2) local ad sales. Patch, with its organizational structure, will get some efficiency boost through regionalized ad selling and some content sharing (as sites with a common school district may combine coverage, for instance). In the main, though, the hard word of gathering local news and selling local merchants isn’t greatly helped by the national brand.
2) How do I parse the Patch taxonomy? Okay, you’ve got your sites. Each one covers a geographical area with some identity, with the sweet spot of population somewhere between 40,000 and 75,000 — large enough to be an audience/market, yet small enough not to be an anonymous “metro” area. (That’s the same size as Backfence’s Mark Potts averred in the first hyperlocal go-round.) Each site has an editor, and Patch recently decided to add a 13th editor to each cluster, for back-up. Each editor has a freelance budget equivalent to about one FTE, more or less, depending on the geography, and will pay stringers to extend what that single editor can do.
Then, you’ve got 12 sites per cluster, each cluster headed by a regional editor and regional ad/marketing manager. Expect between a dozen and two dozen ad sellers per cluster, as they try to divvy up territories to take advantage of their overlap in communities.
Then, you’ve got a block, which is two clusters. Those blocks then roll up to four editorial directors and four sales directors, who divide the country into sections, reporting back up to Patch HQ.
3) So who’s the ad competition? Maybe we should ask, who isn’t? Most importantly, in going after ad dollars, it’s a free-for-all. With Borrell Associates 2011 projection of $16 billion in 2011 local online advertising the mantra many companies repeat, the competition is intense. McClatchy (NYSE:MNI) is saying it is taking in $2.5 million annually in hyperlocal ads, Gannett (NYSE:GCI) is moving more aggressively through GannettLocal and, its recent broadcast site partnership with DataSphere and every other newspaper company sees that local merchant future. The question is how well they’ll execute on the emerging vision. Then, there are local broadcasters in general and Yellow Pages companies knowing that printed behemoths tossed on our doorsteps are endangered species. The target of all these legacy companies: SMB, the millions of small- and medium-sized businesses they used to largely ignore, but which now must be romanced with digital dreams, as bigger-money advertisers make bigger and earlier moves digital.
But, wait, that’s just the old companies.
Then, there’s Examiner.com, which has been replicating its own sites, on its national templates, served by national advertising.
It’s not 2005 anymore, so now we can dozens of local bloggers, independent sorts, scratching for their own livings, from veteran BaristaNet to sites everywhere. Most of these sites are out there selling ads and/or sponsorships. And now, there are ad networks forming. Consider the Miami Herald’s ad network around its partnership with local bloggers and the new TBD’s Community Network, a local blogger ad network out of the chute. GrowthSpur is working with TBD and others to train blog ad pitchers. Then there’s BlogAds and Addiply, among many other newer hyperlocal ad plays.
Soon, the neighborhood florist will have to wear a flak jacket, just to ward off the dozen “hyperlocal” sales guys and gals, all rediscovering the joys of local — at the same time.
But, wait, here’s the real payoff, for those that can wait: Mobile advertising and marketing. Again, the Borrell number is causing mass salivation, and I’d bet it’s whetting the appetites of the Aol Board as they swallow the investment in Patch. Local mobile ads, which fetched $285 million last year, are projected to bring in $4.7 billion in four years (2014). (Interesting fact: At the moment, Patch, unlike TBD, has no smartphone apps ready for its sites.)
4) Who’s the news competition? Same players, more or less. In fact, we may begin to believe that some local communities will soon be better covered by journalists (though metro coverage still suffers) in this digital age than they were in the analog one.
Examiner, with those hundreds of templated local sites, displays a growth trajectory a year ahead of Patch’s — and so its audience stats, provided by The Nielsen Company — greatly outpace Patch. The gap, though, is narrowing. And in sessions per month, and maybe time on site, Patch may be moving ahead. That would show that readers are seeing some value from Patch’s truly local news push, as compared to Examiner’s often shared-content across “local sites.”
5) So how do we make sense of Patch and whether it’s good for journalism? It may be too early to know. Patch is hiring hundreds of journalists to do journalism; that’s novel. Those journalists include 20-year veterans as well as twenty-somethings a few years out of school. It has provided new opportunities for editorial leadership jobs, and that’s a good thing since journalism-schools-as-refuge may have reached a limit.
Most importantly, for the moment, readers will get more news.
The question, here, is one of sustainability. Certainly, there’s the question whether Patch can sustain itself, as its parent Aol struggles to find a new identity and growing business model. Then, there’s the question of the sustainability of hyperlocal journalism already being done from coast to coast. These are true start-ups, often one-man (or -woman) bands, invented by journalists truly passionate about community coverage. Pre-Patch, it’s been the fledgling blog ad-and-distribution network experiments that gave hope that more money could be found to support these ventures. Now, we have to wonder whether Patch — which will link to other sites it finds useful, but won’t network them — will make the sustainability of these more organic, non-templated local blogs more questionable.
Once again, we’ll come back to the question not of how much coverage a community needs, but just how those doing it are going to be paid.
6) What’s in the secret SEO sauce? Wouldn’t a lot of legacy publishers like to know? As I pointed out in a quick post on a breaking Bay Area story covered by both Patch San Ramon and the Contra Costa Times, Patch’s story appeared at the top of Google (web & news), though the CC story was more detailed and more recent. Check on many local news stories. Time and again, Patch and Examiner will rise to the top, besting newspaper content. That’s the mastery of search engine optimization, a science too many publishers still flunk. Maybe the Knight Foundation, in its quest to bolster news content generally, should move up on its to-do list tools that help publishers finally master SEO.
7) Is there any connection between Patch and Aol’s Seed, beyond the garden-metaphor-approach to naming digital start-ups? Yes, in fact, though, just in the testing stage. Seed — Aol’s Demand-like, Associated Content-like Pro-Am news business — may feed freelancers into Patch. As each site’s editor decides how she wants to use that freelance money, one logical place to check will be Seed’s database of contributors, which, of course, is geo-tagged. Consider this a work-in-progress, but one way Aol will seek to connect the dots within its content-creating business, now including Aol Finance, Politics Daily, Engadget and more.
8) Who may the biggest winner out of the intense hyperlocal competition? With all those new players in action, we’ll see lots more content, even if the ad battle is brutal. So, look to the aggregators, like OutsideIn (partnered with Tribune), FWIX (partnered with New York Times) and OneSpot (partnered with Wall Street Journal). Creating content is expensive; aggregating is cheap.
9) If hyperlocal is such a good idea, how come Rupert Murdoch’s not investing in it? Murdoch is ubiquitous in the talk of journalism’s future — Alesia bundled content site, new platform for tablets, a tabloid tablet product, pay walls and lots more — but we don’t see him in the hyperlocal space. Does he know something Tim Armstrong doesn’t? Or is the retail of block-by-block selling from Portsmouth to Pleasanton just too small potatoes?