Dow gives back 0.2%. Watch these stock charts: NKE, S, CREE >>> READ MORE

5 Reasons the AOL Patch Venture Should Be Shut Down NOW

Tim Armstrong is just the beginning of Patch's problems

By Jonathan Berr, InvestorPlace Contributor

AOL (AOL) was doomed from the start with Patch — the network of hyper-local news site it acquired in 2009 from a group of investors including CEO Tim Armstrong. Though Armstrong recused himself from the discussions surrounding the AOL Patch acquisition, he soon became Patch’s biggest defender … which in turn was a recipe for disaster.

aol-patch-tim-armstrongAccording to a recent piece by New York Times columnist David Carr, Armstrong argues that he gave the AOL Patch venture his best shot in terms of profitability. Carr, meanwhile, added that Armstrong “reluctantly throwing the towel.”

Of course, AOL responded by continuing to deny that it’s winding down the batch of Patch websites, and has said is trying to save the sites by pursuing partnerships for the few Patch sites that make money. But regardless, Tim Armstrong is still clueless about Patch.

“At the end of the day, could Patch have been run better? We don’t know,” Armstrong is quoted as saying in the NYT column.

But in reality, the AOL Patch endeavor was as predictable as a bad movie. Heck, I bet it will be studied by future business students as an example of how executive hubris can trump common sense. That’s because AOL Patch was on the fast track to failure from the get-go; let’s take a look at five of the many reasons why.

AOL Patch Problem #1 – Knowing the Market

aol-patch-tim-armstrongPatch was founded in 2007 and acquired by AOL in 2009. During the early days of the AOL Patch acquisition, Tim Armstrong waxed eloquently of Patch’s mission: “improving local communities with deeper online information, accountability through journalism, and a platform for communicating.”

The problem? Armstrong he never described how intended to back up those flowery words with deeds.

One problem, as AdWeek noted, is that many hyper-local news venture flopped before the AOL Patch deal due to a lack of advertiser support.

Moreover, Armstrong seemed to forget that newspapers — battered, beaten and unloved — were doing the same thing that he was trying to do with the Patch websites … and had been doing so far longer.

AOL Patch Problem #2 – Quality Matters

aol-patch-tim-armstrongThen again. Armstrong had obviously hoped to capture a slice of the huge local advertising market. But he forgot one thing in that AOL Patch quest: To be interesting.

Much of the Patch website content I have seen is dull and poorly executed.

Even worse, Patch managers and editors — hampered by tight budgets — took a one-size-fits all approach to news. AOL Patch websites are filled with stories that appear to have been cooked up by top managers who knew little about the particular communities. A prime example: 5 Secrets to Your Obamacare Success.

As a result, many AOL Patch websites have a homogeneous look that turned off the very local advertisers they were trying to attract.

AOL Patch Problem #3 – Botched Rollout

aol-patch-tim-armstrongPerhaps AOL CEO Tim Armstrong’s biggest blunder was the actual roll-out of Patch. In 2009, there were three Patch websites. A year later, the AOL Patch venture had expanded to 100 sites … and now there are more than 800.

That kind of expansion is head-scratching. Why was Armstrong in such a rush to expand the AOL Patch footprint, when he had not yet figured out of the business was sustainable?

Sure, Armstrong recently vowed that the AOL Patch business would be profitable by the end of the year. But it shouldn’t have taken this long for that to be the end game.

Meanwhile, Armstrong also announced plans in August to try finding partners for the one-third or so Patch websites AOL couldn’t see ever making money. But why Gannett (GCI), the New York Times (NYT) or another publisher would be tempted to buy a money-losing site is beyond me. They have enough headaches.

AOL Patch Problem #4 – Mismanagement

aol-patch-tim-armstrongAs Carr noted in his AOL Patch profile, Tim Armstrong “had a sentimental, and some would say debilitating, attachment to Patch,” since he helped create it while still working at Google (GOOG).

But the mismanagement didn’t end there; people skills also seemed to have eluded this exec when it comes to Patch. Just think back to the public firing of AOL Patch Creative Director Abel Lentz, who got the boot during a conference call.

Although Armstrong later apologized, the soap opera surrounding AOL Patch employees didn’t end there. Every few weeks, there seems to be new headlines about fired employees and increased griping from those who are left. Managers at AOL Patch websites are demanding ever-increasing workloads from a shrinking staff.

That distraction just doesn’t seem to be worth it.

AOL Patch Problem #5 – Competition

aol-patch-tim-armstrongFrom the beginning, Patch was based on the concept that local news is hard to find on the Internet. To be blunt, that is ludicrous.

Anyone who doesn’t know what’s going on in their town isn’t looking too hard, or hasn’t heard of Google. Heck, I get local police news delivered to my phone. Our local school district keeps us up-to-date through its website and the information that it sends home with students.

And it doesn’t end there. For the cherry on top, we have newspapers and broadcast news — as we’ve had for decades. Heading to an AOL Patch website for that same information doesn’t even enter the equation for me or most people.

As of this writing, Jonathan Berr did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

©2017 InvestorPlace Media, LLC