The Patch Effect

By Lisa Skube on January 1, 2011 1 Comment Experiments

The Patch Effect: Will AOL's hyperlocal experiment across the new media news ecosystem yield peril or profit? An assessment from the ground up offers a deeper look.

Patch

The explosion of community sites, or hyperlocals, across the nation has emerged in smaller and mid-sized markets where many traditional news channels have disappeared. AOL's CEO Tim Armstrong also saw this demand in the market. Patch was their answer. Formed in 2007, Patch was purchased by AOL in 2009 and in March of 2010 the company announced they'd be investing $50 million in the build out of 500 sites by the end of that year. The number of Patch outlets operating by early January 2011 has been reported as more than 700.

Since the fall of 2010, Reynolds Fellow Lisa Skube has been looking at innovations in news and reporting with Missouri School of Journalism master's program graduate Tram Whitehurst. Here is the first of two posts offering what we've learned.

The Patch Effect:
What AOL's new venture could mean for hyperlocal news

By Tram Whitehurst
January 2011

What is Patch?

All the attention is understandable. There's the $50 million investment, the hundreds of sites that seemingly sprouted up overnight, and the big name behind it. These facts are hard to ignore. Much has been written in recent months about Patch.com, AOL's ambitious hyperlocal news venture. The coverage often has turned a skeptical eye toward Patch, questioning its operations, motivations, and intent. This assessment seeks to work from the ground up to answer questions about Patch's innovations in journalism and what they could mean for hyperlocal news ecosystems in communities across the country. It is based on statements from Patch executives in interviews with other journalists and on interviews with editors of grassroots hyperlocal Web sites. The goal is to take a reasoned approach to the issue, to answer a few questions, and probably to raise a few more. First we take a look at Patch itself: Where it came from, where it is now, and where it might be going.

The seed

As many metro newspapers have cut back on local coverage in recent years and new technologies have made publishing online relatively cheap and easy, hyperlocal news sites and blogs have sprung up in communities across the country. The motivation for starting independent hyperlocal sites is often to tell the untold stories of communities and to bring like-minded people together online. The sites are as diverse as the communities they cover. They generally focus on the local news and events of a particular neighborhood, town, or niche group in a particular area. They are run by concerned citizens, professional journalists, traditional media outlets, and civic groups. Some rely on advertisements, others on donations or foundation support. Many are labors of love.

AOL is certainly not the only big media company to try its hand at hyperlocal. In fact, the path is littered with failed attempts. Among the most well known of these are the Washington Post's LoudounExtra, which shut down in 2009, Backfence.com, which closed in 2007, and Microsoft's Sidewalk, which failed in the late 1990s. Others are still active. In August 2009msnbc.com bought EveryBlock, which offers publicly available data such as crime reports, building permits, and restaurant inspections in cities across the country. In the same year, the New York Times launched The Local, a community journalism effort produced by residents and student journalists with oversight from Times staff.TBD.com is a hyperlocal effort for the metro Washington, D.C. area owned by Allbritton Communications Company. (Though not owned by larger media companies, Placeblogger and Outside.in are other well-known hyperlocal networks).

Although hyperlocals have been 'the next big thing' in journalism for a number of years, practitioners are still searching for a business model that works. So far, they've had limited success selling ads. It's a challenge to try to reach small local businesses that may know nothing about online advertising. There's also the fact that by their very nature, hyperlocals attract a relatively small audience. But the hyperlocal market also happens to be a potentially lucrative source of untapped advertising revenue. Some estimates put the figure at close to $100 billion, based on the fact that many local businesses have yet to take their ad dollars online. The challenge remains finding a sustainable business model to capitalize on such an opportunity. AOL thinks Patch is the answer.

AOL CEO Tim Armstrong helped found Patch in 2007 while he was still working at Google. AOL acquired Patch in 2009 for about $7 million. Armstrong said that he got the idea for Patch when he went looking for event listings in his own Connecticut community and couldn't find what he needed. Armstrong's stated goal for Patch directly addresses that problem: "To become nothing short of the most useful source of news and information for small communities online." Patch is looking to create a new, sustainable model for hyperlocal online community news.

Making a statement

AOL announced last March that it would be investing $50 million in Patch in 2010 and adding hundreds of sites. Since that time Patch has expanded rapidly, increasing the number of sites from about 30 to more than 700 in 19 states, and hiring hundreds of journalists to fill the newly-created positions. The company boasts it is the largest hirer of full-time journalists in the U.S.

Why such rapid expansion? Patch says there's a method to the madness. In an interview, Patch President Warren Webster and AOL President for Ventures, Local & Mapping Jon Brod said that "scale was important in part because it provides additional revenue opportunities, including the ability to sell inventory across the country to national advertisers and to syndicate some of the data it is collecting on the communities where it has sites. They also said that it helped in establishing the Patch brand. Much of the initial $50 million investment went to building up the infrastructure needed to operate the sites, along with associated startup costs such as setting up a recruiting team, meaning it is becoming less costly to launch additional sites."

Selecting communities in which to open a site is both an art and a science for Patch. There is a 59-variable algorithm that takes into account factors such as average household income, voter turnout and public high school rankings. Patch also tries to get a sense of less quantifiable characteristics — such as community engagement, a vibrant business district and a walkable Main Street — by getting out into the community and talking to residents. The majority of Patch sites are located in relatively affluent communities of 10,000-100,000 residents. As Patch Editor-in-Chief Brian Farnham explained, "We're not a charity, we're trying to make money doing this, so that means identifying markets that we think can support an ad-driven business." He went on to say that as Patch matures it will look to expand into communities that don't necessarily fit the current criteria.

Patch is structured around the local editor, who runs each site — writing stories, managing freelancers and much more. (In some rare cases, there are two local editors if the market is big enough to demand that). The editors must live in the communities they cover and generally make between $35,000-$45,000 with benefits. They are given a laptop, smartphone, digital camera, and police scanner. The sites are then organized into regions of 12, which are run by regional editors. Each region has a '13th editor' who provides additional support for the local editors. Regions are grouped into super regions, and super regions are grouped into zones. There are four zones, each of which is headed by an editorial director. Above that, there's Farnham and a team at Patch headquarters in New York.

Backlash

It didn't take long for critics of AOL's aggressive move into community journalism to state their objections. A number of fellow journalists and media professionals have expressed skepticism and at times even open hostility toward the idea of Patch. Some of the tension is a result of journalists' natural inclination to question something that seems too good to be true, i.e. How and why is it that Patch is expanding so rapidly when many in the industry are being laid off and revenue is falling? Others liken Patch to a Walmart of news, steamrolling its way into small communities and poaching stories, resources, and advertising from established sites. This criticism came to a head in October at the Online News Association Conference, when USC Annenberg Assistant Professor Robert Hernandez asked Tim Armstrong point blank, "Is Patch evil?" (Hernandez later interviewed Brian Farnham; some of that interview is quoted below).

Below is a list of the most common criticisms of Patch and howPatch executives have responded:

Criticism: Patch local editors are inexperienced and don’t always know their communities.
Response: The average local editor has 6.6 years of journalism experience and is required to live in the community he or she covers.

Criticism: Patch overworks its editors.
Response: "You are going to have to work hard, it's a startup," Farnham said. He added that 75 percent of editors are paid as much or more than their previous job.

Criticism: Patch is not focused on quality journalism.
Response: "We take quality very seriously, and we've tried to build a structure that can attend to it. That includes having Regional Editors overseeing the Local Editors, and it includes making budget available to hire things like copy editors locally. We leave those decisions largely up to the local Patches because we firmly believe a one-size fits all model doesn't make sense. Some regions may have different issues around quality than others. But before any of that, we spend a LOT of time hiring carefully — the Local Editors are absolutely the heart and soul of this operation and we trust them to do an awful lot. Maintaining a high level of quality is job #1," Farnham said.

Criticism: Patch editors plagiarize from other news organizations.
Response: "[F]or any self-respecting journalism operation, plagiarism is a serious concern. But we are really not alone in hiring human beings who make mistakes, which is often where a lot of instances of plagiarism happen, especially online…[W]hat really matters to me is how we respond to any mistakes we make, and what we do from that point forward to learn from the mistakes and try not to repeat them. Following the incidents, we created a new online training module about issues of plagiarism and we're making it a requirement for all editors, old and new, to take the module," Farnham said.

Criticism: Patch will kill grassroots hyperlocal news sites.
Response: "I totally get those concerns. I understand how someone running a hyperlocal site mostly as a labor of love would be concerned when Patch opened in their community, but we are truly not trying to be the Deathstar of hyperlocal. What we see ourselves as is a platform for local community. So it's more than just a news site. We talk about wanting to digitize small towns and have the sites reflect the community the way its residents would recognize. That's a long term, constantly evolving process, but we wanted to establish it on a foundation of professional, unbiased journalism," Farnham said. "I live in one of the most resourced communities in America, there are blogs in town, they don't cover my needs as a consumer. If you think it's evil, put on your consumer hat for a minute…You know, what's the consumer need in the town, and are you meeting it?" Armstrong said.

Innovations in community journalism

Although some critics have argued Patch is replicating a strategy others have tried and failed, Patch maintains that it is innovating in a number of meaningful ways. Of course there is the size, speed, and scope of the project, but Patch points to other less visible components as well. These include: Focusing on online-only; emphasizing original content rather than aggregation; hiring editors to live and work in the communities they cover; and building relationships with local businesses with a free business directory.

The directory is something that Patch is particularly excited about, and it will likely play a significant role as Patch's advertising strategy matures. Patch thinks its directory is different than others in that it is more accurate and robust, allowing businesses to post descriptions, photos, and videos. Also, the basic listings are free. (See Ellington Marketplace as an example of a fee based online directory model). As Farnham explained in an interview: "It's really our own, hand-built local yellow pages. We thought it was important, if we were going to do this, that our site represent as much of the community as it could, and that meant all the businesses and organizations that exist there. We could've just gone out and bought one of the many directories that exist for the country, but in doing research we realized that even the best of these lists aren't better than 35% wrong. That's not news to anyone who has searched for local businesses on online yellow pages sites, but its' still pretty staggering. So rather than resort to this, we made the decision to invest in a team that, before we launch, goes to every business, organization, government agency, public park, etc. and records as much tailored info into structured data fields as we can, and then takes at least 10 quality photos. That creates a crucial basis for the news operation as well — news happens at places, and by having a detailed listing for those places, we have a head start on anything that occurs there and can geolocate the story instantly. That's just one small example of the usefulness of this. The bigger point is that we see businesses as a part of the community as much as any resident, and their lives, so to speak, should be reflected on Patch."

Looking to the future

With all the attention Patch is getting it's important to remember that the project is still in its early stages. There are bound to be changes in the near future, many likely focused on innovations in the business model. As some have rightly observed, journalism is only one part of the equation. With its directory and other efforts, Patch likely will steadily try to build relationships with local advertisers. Patch can use its resources and national scale to offer something unique to local businesses. Patch is already in the process of integrating itself into larger AOL properties. On the new AOL homepage there will be a section for a local news feed from Patch, and on MapQuest there will be links to Patch sites located within the directions.

This raises the question once again of what exactly the balance will be between competition and collaboration with grassroots hyperlocals. Some fear Patch will go head-to-head with hyperlocal sites and steamroll them out of existence. In response, several media professionals have published plans on how to respond to Patch in the marketplace (Mel Taylor is even offering a "How to Beat Patch" webinar). This head-on, competitive approach calls for existing sites to embrace local advertisers and to focus on their unique strengths. It also cautions hyperlocals that they dismiss Patch at their own peril. After all, many traditional news organizations did not fully grasp the import of the digital revolution, and they have been playing catch up ever since. The plans also criticize some hyperlocal operators for failing to understand that news is a product and that advertisers are part of the audience too. Instead of worrying about all the money behind Patch, sites would do well to understand their own competitive advantages. That means focusing on locality, flexibility, and responsiveness. Since small business owners are the financial life-blood of local news organizations, the plans say close relationships with them should be a primary goal for news outlets.

For their part, Patch executives have said that they are willing to form partnerships that work for both sides. "What we do when we come into a market is certainly not just announce, 'Hey we're the only game in town,'" Armstrong said. "What we want to offer is a cohesive comprehensive experience. There is that ecosystem…We are always open to exploring ways we can work with existing media outlets in communities where we are launching a Patch site. No option is closed off." Farnham elaborated on this point: "Partnerships are going to be a big area of concentration for us in the coming year. This past year has been mostly about just establishing ourselves — just putting out the shingle and getting our legs beneath us. But now we want to explore all the opportunities in the various ecosystems we've joined. I don't think you can identify one ideal relationship — it's really going to depend on what's in the market. Maybe it's something around sports coverage in one community; maybe it's just cross-linking in a formalized way in another. We're open to all these conversations."

So what does the future hold for Patch and hyperlocal news?

That remains to be seen. What's clear is that not all communities are adequately being served by a local news outlet. The optimist could argue that Patch means more local news coverage for such places. Patch also pays its editors and contributors, possibly keeping good journalists working the local beats. And the funding behind Patch means it has more flexibility to experiment with new models of journalism and new business models. Finally, and unexpectedly, Patch could even improve the market for local advertising. By bringing in advertisers who have never worked with small local sites, it might create new customers for everybody. The pessimist of course would argue just the opposite: That Patch is committed more to profits than to journalism, and that it will cause others to fail if it doesn't also go bust itself.

The next installment in this series will examine what editors of grassroots hyperlocals across the country are saying about Patch and their role in the local news ecosystems.

Related Article

The Patch Effect: Part 2
What the hyperlocals are saying

read more

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Comments

PATCHES

The problem is that the Patch sites I have seen are just not interesting enough to hold my attention. There are many other sources for news, the television and local bloggers. Twitter even does a better job of grabbing news through local people. Patch does not develop anything that makes a reader want to return.

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