tim_armstrong

Asa Mathat

Media


Patch isn’t dead, and AOL isn’t officially done with it. But Tim Armstrong’s big bet on local news has come to an end: The AOL CEO is handing over Patch to investment fund Hale Global, which will run the network of news sites.

The deal is structured as a joint venture, and AOL will hold on to a small stake. But Hale will control and operate the company, and AOL will no longer have to fund Patch’s losses, which Armstrong had promised would stop by the end of 2013 but didn’t.

Hale specializes in turnaround projects and “special situations,” and normally that would mean that many of the 900 Patch sites would be shuttered — especially since that’s what AOL said it was going to do last summer. But AOL and Hale say all of the Patches will remain open.

Then what? According to a press release announcing the deal, “the companies are committed to re-launching Patch as an efficient platform that allows citizens and businesses to create and share locally-themed news and content — not just with those in their own communities but to the wider world.” Got that?

Patch is one of many unsuccessful attempts to provide profitable local news in the Web era. Presumably, if someone figures out how to do it, there’s a big payoff. And theoretically, if Hale fixes/transforms Patch, AOL can capture a (very small) bit of upside via its ownership stake.

But in the big picture, the move means Armstrong has finally agreed to drop a project he has championed for years, even as investors begged him to stop. Armstrong initially funded Patch himself, then acquired the company shortly after taking over AOL in 2009.

Then he poured money into the venture, and swapped out management multiple times, but could never make it work. In 2012, Patch lost $35 million; by the end of last month, it was still losing money. Now it’s someone else’s problem.

Update: Here’s the way Armstrong is describing the deal to AOL employees, in a memo he just sent out via email:

AOLers,

AOL has a strong track record of improving, pivoting, and partnering – that’s what successful companies and start-ups do. AOL’s return to growth has been built by making smart investments and by calibrating our investments while moving through opportunities.

We pivoted our ads business to programmatic, we pivoted our content business to powerful brands, and we pivoted our video production to becoming a video platform.

Today we are pivoting another area of our business: local. The local digital space will reach $152B by 2017, driven by a $21B growth in local digital revenue over the next three years and we have invested in local with Patch. The goal for Patch has always been simple – to be a local platform for information and commerce in towns and to serve communities in a meaningful and human way.

After extensive discussions over the last several months with many companies interested in the local media business and local platform business, today we are announcing a joint venture partnership with Hale Global. Hale Global is a private company that has a successful track record of investing and growing technology assets, and we believe they are very well positioned to nurture and grow Patch. Hale has made investments in local commerce and platforms, and they have a strong team of leaders and technical expertise. Hale’s CEO, Charlie Hale, is a strong believer in the power of local, local platforms, and local storytelling. Bud Rosenthal and Charlie Hale will be detailing Patch’s go-forward plan and next steps with the Patch team today.

AOL has delivered on our commitment to our investors and put Patch in a position to be successful. We are retaining a meaningful minority interest in the joint venture, and we stand to benefit from Patch’s pivot to platform excellence.

While Patch pivots, it is important to remember that it serves millions of consumers throughout hundreds of towns in America and partners with some of the largest and smallest businesses that serve those communities. Hale will help Patch improve, and we will be partners with Hale in the next phase of the journey – TA




3 comments
Jerry Gropp Architect AIA
Jerry Gropp Architect AIA

I've long been a major contributor to Mercer Island (WA) Patch knowing its importance to our small community out in the middle of Lake Washington next to my native city- Seattle.

This is great news indeed. JerryG-

tmgotech
tmgotech

Any chance Abel gets his job back now that Tim isn't calling the shots anymore?

eknirb
eknirb

At a seedy bar somewhere in NYC..Armstrong leans over and says "set 'em up again, barkeep."

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