AOL’s Armstrong: Why Patch is a good investment

AOL chief executive Tim Armstrong told investors this morning that he has “a lot of tens of millions of dollars” invested in Patch “and I would not put investors in any situation that I wouldn’t want to be in myself.” The average Patch roughly costs $150,000 to run, he says, while the average marketplace that it’s in has about $900 million of commerce.

There’s no tremendous interest in it from a media landscape other than to say a lot of – basically, gossip about Patch in terms of what has happened, what’s happening there and how is it performing and people love to talk about it. But the reality is Patch has gone from zero to – went up to number four in local – in one year on the Internet.

(I suspect he’s including this Feb. 8 Romenesko piece in his “gossip” reference.)

Business Insider is all over Armstrong’s remarks. Here’s today’s coverage:
* Armstrong passionately defends AOL’s decision to spend mllions on Patch
* “We removed a bunch people out of the company [and] our results got better”
* It looks like Armstrong’s ready to sue over patents

Comments

comments

3 comments
  1. swish said:

    To get in on the ground floor before the inevitable patch bashing starts on this thread:

    1)Yes, Patch employees know that corporate types always try and trumpet their product even if it isn’t doing well financially (see Tribune).

    2)No need to be so smug about it/hope that all Patch editors get fired in a year or so.

    3)Stop acting like Patch is any more “evil” then any other national media conglomerate (see Gannett, Tribune, etc.).

    You’re welcome.

  2. Perry Gaskill said:

    My take on the three BI posts:

    The whole patent portfolio thing is pretty much from left field. It seems strange that if Aol has had such ammo available, it hasn’t used it before now.

    It’s interesting that Armstrong continues to stress the 59-point criteria used to select the communities for Patch sites. The real question is what if the answers generated by that criteria were based on some faulty assumptions? What if, for example, all those things such as student-teacher ratios, voter turnout, etc. were exactly the kind of indicators of communities that would not work for a local news effort based on a national franchise model?

    People who work with databases a lot are familiar with this concept as a failure of business logic; you’re getting the correct answer to the question you asked, but you’re asking the wrong question.

    Probably the harshest criticism of Patch comes from Aol investors who are unhappy with Patch’s burn rate. By now, so the thinking goes, Patch should be further along on the profit curve. The fact that the degree of the problem is open to debate doesn’t mean they don’t have a valid point, and Aol hasn’t helped itself in this by setting and hitting specific revenue goals. It’s as if Patch is always about to try out some bold new stuff that ends up not amounting to much, but by the time anybody realizes it, Patch has still more new stuff it’s going to try out.

  3. Not sure what he means in terms of number four, but there’s no way Patch is number four in the L.A. market.