AOL’s Patch to be profitable by 2014

aols patch to be profitable by 2014Despite many predicting doom, gloom and the death of the very concept of hyper-local content, AOL has announced that Patch, its local news service, is expected to head into the black within the next twelve months. Speaking at a conference, AOL chief executive Tim Armstrong said that the news underscores his believe that investing in local Internet is the way of the future.

Armstrong talked about the growing success of Patch at the Dublin Web Summit today, saying that the service has over 17 million users, and is on route to being profitable in the fourth quarter of 2013 (This year, Armstrong says, the service will generate somewhere close to $40 million).

Armstrong has reason to be bullish about the success of Patch; he co-founded the service as Patch Media way in 2007, two years before he joined AOL with the intent of creating a service that would be able to offer users similar information as would traditionally have been found in local newspapers before the Internet quickly put a stop to the idea of a healthy newspaper industry (Armstrong is said to have founded Patch Media as a response to being unable to find enough information about his hometown of Riverside, Connecticut, online). The mix of local news, weather, and traffic information initially attracted criticism from many onlookers, who cited poor working conditions (and, in some locations, poor quality of output) as an argument against such a decentralized business model. Nonetheless, when Armstrong became AOL CEO in 2009, one of the first things he did was purchase the company for an estimated $7 million in cash (Armstrong was paid in AOL stock).

The news that the site is approaching profitability has Armstrong happily sharing the wisdom behind his initial decision to launch the service in the first place, telling the Dublin Summit audience that “the needs of the local community remain the same. The way we approach it is, by investing in the community, we become part of the community and long term that works. It was the business model for local newspapers between 1965 and 1995.” And, of course, we know how well that worked out for local newspapers after 1995.

Since its acquisition by AOL, Patch has been criticized alongside other AOL/Huffington Post properties for the non-payment of contributors, something that Armstrong dismissed by describing AOL as “the single largest investor in journalism” online, going on to describe the company as “big believers in journalism and big believers in paying journalists.”

Perhaps, when Patch starts turning more of a profit, then its contributors will start seeing more evidence of that. Currently although there are paid positions (editors and sales managers, apparently), other contributors do it for the love of the community – or, perhaps, the hope of a payday at some point in the future.

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