The Patch Saga, and Its Implications for Local Media

By: Steven Jacobs | Street Fight

Aol’s decision to unload its struggling hyperlocal network Patch earlier this week may not have been unexpected, but the distressed property’s fire sale does carry with it some broader implications, even as many local media companies have recently started to see signs of reinvestment. After two years of proxy wars, PR debacles, and big losses, the network’s legacy is at once a story about the perils of creating expensive digital content for markets that may not support it, the troubles of scaling a local digital media business, and the ambition of a major technology executive who thought he had the solution to some of the major issues in local media’s transition to digital.

The beginning of the end came for Patch in May 2012, when Aol chief executive (and Patch founder) Tim Armstrong promised investors that the hyperlocal network would reach run-rate profitability or find a partner to share the costs by the end of 2013. The move came amid a vicious proxy fight, in which a Starboard Value LP, an activist investor in Aol, targeted Patch as example of the board’s mismanagement, publishing a scathing 150-slide presentation, which included shocking projections of Patch losses.