Updated: AOL (s aol) continues to pour millions of dollars into its Patch.com “hyperlocal” news project, the company confirmed on Wednesday as it released its latest financial statements. But it’s also rolling out an expansion of that project aimed at doing to local news what The Huffington Post did to national and international news: namely, aggregating and “crowdsourcing” it. The new venture, called “Local Voices,” was launched on Thursday, and involves pulling in local bloggers and featuring their content on local Patch hubs. Can Arianna Huffington work the HuffPo magic a second time? And more importantly, will that help AOL dig itself out of the financial hole it’s in?
As we’ve described before, AOL continues to scramble to try to generate new money-making services that can replace its Internet access business, which is declining rapidly, along with the company’s advertising revenue. In the most recent quarter, AOL said its overall revenue fell by 17 percent, and net income dropped by 86 percent. So CEO Tim Armstrong has been busy spending the cash the Internet access business still generates on things like the $315-million acquisition of Huffington Post, and on the expansion of its editorial and content operations — including Patch — which founder Arianna Huffington has taken over responsibility for.
AOL Is Spending Heavily on Patch
A venture like Patch doesn’t come cheap: AOL said that in the first quarter alone it spent $40 million on the project, which has seen the company hire journalists for close to 1,000 towns and communities across the U.S. — and that’s on top of the $75 million that it spent last year.
The launch of “Local Voices” seems to be an admission that even this kind of heavy spending may not be enough to accomplish what AOL wants. Patch Editor-in-Chief Brian Farnham reportedly said in an internal memo that it represents “a full-on course correction” to the project’s strategy. In a nutshell, it’s an attempt to duplicate the Huffington Post approach — namely, aggregating mainstream news and bloggers who are producing content for free. Arianna Huffington said the new venture will involve:
[A]ggregation of any news affecting these communities; and cross-posting and amplifying the work of local bloggers who are already doing great work, providing them an even more powerful platform for expressing their views.
It remains to be seen whether this kind of aggregation is welcomed by local bloggers, or whether they react like some of Huffington Post’s contributors did and later launch a class-action lawsuit looking to be paid. But the bigger question is whether AOL can even make this kind of aggregation work on a local scale.
Similar Hyperlocal Experiments Have Failed
Plenty of similar hyperlocal web experiments have failed over the years, including Backfence and Bayosphere, as well as a more recent Washington-based venture called TBD, which was effectively scaled back dramatically by its parent company. The list of failures also includes some prominent ventures by mainstream media outlets such as The New York Times (Update: as associate managing editor Jim Schachter explains in a comment below, the Times venture still exists, but has been outsourced to local journalism students) and The Washington Post, both of which attempted to take a kind of Patch approach to local news.
The most successful local news sites are those that have emerged from the communities they serve, including the startup Sacramento Press in California, and other long-time online communities such as Baristanet. As I’ve argued before, the automated aggregation approach taken by some ventures doesn’t seem to really work, in part because this leaves a local site without any real personality. Everyblock, which was acquired by MSNBC in 2009, recently redesigned the site because founder Adrian Holovaty said he realized automation alone wasn’t working.
The bigger issue for AOL is that even if it manages to hit the Patch ball out of the park, and creates thriving communities in hundreds of locations across the U.S., it’s not clear whether that’s going to be a good business or not. Building online communities is all well and good, but generating revenue and profits is what AOL really needs to do. Both the New York Times and the Washington Post shut down their local ventures in part because they didn’t generate enough revenue to make them worthwhile. So far, Armstrong hasn’t made a strong case for why Patch should be any different.
AOL says it expects to generate local advertising revenue from its Patch sites, but admits this isn’t even close to happening yet. Meanwhile, it plans to continue pouring millions into this unproven hyperlocal strategy. Tim Armstrong just keeps piling his chips higher and higher on his Patch bet, but the odds of winning continue to be extremely slim.