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Interview: Patch’s Webster: The Plan To Produce Returns On That $50 Million Investment

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While most of the big players hoping to crack the local news market — from Everyblock to Yahoo (NSDQ: YHOO) — have chosen to primarily aggregate third-party info on their sites, AOL’s Patch has chosen an alternate — and costly — strategy: hiring full-time editors in dozens of markets across the country to produce original content about the communities where they live, as well as salesmen nearby to sell ads. The hyperlocal network now has 46 sites in California, Connecticut, Massachusetts, New Jersey and New York. The tab: $50 million to expand to “hundreds” of sites by year-end.

Will it work? In an interview with paidContent, Patch president Warren Webster talks about why he thinks it makes business sense for the company to launch so many sites so quickly (even though it’s not profitable yet). Webster, who was Patch’s first employee and joined AOL (NYSE: AOL) when it bought Patch last summer, said the network is doing better than AOL had expected — but declined to offer any financial details or other metrics to bolster his case. Read on for edited excerpts from the conversation.

paidContent: How long will it take to become a truly national network of sites?

Warren Webster: Ultimately, we feel like every town in America could have a Patch potentially, but we’re really focused on making sure that the towns we are in are being served properly. We’re still in that stage of evaluating our success town by town — really serving that town well. That said, we are expanding rapidly. We expect to be in hundreds of towns by the end of this year.

“Hundreds of towns.” Is that because a single site is already profitable. Have you proved that the model is working?

We don’t comment on profitability. But I can say there are obvious efficiencies from having more than one especially in a contiguous area.

We have a local editor for every site and then they report up to a regional editor, who reports up to an editorial director (for each coast). And they report up to Brian Farnham, who is the editor in chief.

(The business side) is almost identical, except that we have one advertising manager, sales person and marketing person for every four Patch towns.

Will AOL’s freelance content site Seed help at all as you grow?

At this point, we’re not integrated with Seed, but we’re definitely … interested in what they’re doing. It would be a miracle if any startup ended up with the same model that they started with exactly, and we’re certainly looking at working with Seed and any number of partners whether they are AOL or not.

AOL says it will invest $50 million into Patch this year. How long is it giving you to produce a return on that investment?

We are exceeding all of our metrics and goals. So we’re very bullish about the future of Patch, which was important in AOL’s decision to support it at the level that they did.

What metrics are you referring to? Can you be specific?

We don’t release internal numbers, but our traffic, revenue and user-engagement metrics have all been extremely positive.

It looks like CPMs on most of the sites are $15.

The only thing we sell by CPM is the do-it-yourself ad system. The majority of our ads are are sold fixed placement, fixed time, fixed price. We sell for a certain price a banner for a certain amount of time. It’s not a CPM model.

How are you marketing the sites?

We do a lot of grassroots marketing. We sponsor Little League teams in every town that we’re in. We are always at events. We have booths. And we’re in the parades. We’ve had every one at Patch standing out on the train platforms handing out fliers to people getting off the train or getting on the train. The best marketing we have is just the fact that we have people in the market all the time writIng stories and taking pictures and taking video about things going on because as soon as you see your neighbor or your kid or your friends on a video … they’re going to send that around to everybody. It’s almost viral within a small community.

As you expand at such a rapid rate, how do you maintain quality of the content in each of those sites?

We look for the best and brightest local editors, (people) who are really passionate about their communities but also have solid journalism backgrounds, education and experience. And then they’re working very closely with their regional editors, who tend to have more like five to 15 or 15-plus years of journalism experience from bigger news outlets and they are all sort of checking each other’s work constantly, so we really take the journalism side of things pretty seriously.

What journalism that has been produced so far are you particularly proud of?

Most recently, the coverage of the storm that caught everybody by surprise in the Northeast. We got so many calls and e-mails saying — for example, in Darien, the Darien Patch was one of the only places to get information about what roads were open and when schools would be open again. The editors were working 24/7 to make sure everyone was up to date on the latest news about the storm.

How about in terms of investigative work?

There’s a lot going on. I think one of our sites broke a story about a candidate for local office who had a criminal record that no one knew about.

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