August 15, 2013 Last Updated 7:47 am

Retweet: How hyperlocal can work, and why it doesn't at Patch

The fine art of headlining is such that many times the message conveyed in it is the opposite of what the author of the story intended. But sometimes a headline, or in this case a sub-headline, hits its mark.

This morning Alex Kantrowitz writes for AdAge about AOL’s Patch. It’s been a rough week or two for the hyperlocal division as it made news when it laid off hundreds of employees, and again when its CEO rashly fired one.

The point of Kantrowitz’s piece – AOL’s Patch Is Purging Staff, But Here’s How ‘Hyperlocal’ Can Work – is that there are examples of hyperlocal working and thriving. Further, hyperlocal does not scale well into a large business.

“Local doesn’t scale,” the editor and publisher of RiverheadLOCAL.com, Denise Civiletti, is quoted as stating.

logoBut the piece has the sub-headline Small Sites Making Six Figures In Revenue Won’t Support Corporate Structures, which is something that is only indirectly talked about in the post. (Actually, there is a typo in the sub-headline, corrected here.)

It’s a subject worth exploring, for when you look back at the founding of Patch you see that it really was a built from the top down. This is the exact wrong way to build a network of anything.

I have often pointed to Vox Media’s SB Nation as a good model. SB Nation is made up of a collection sports bloggers supported by a corporate entity that provides both web and ad services, as well as the benefits of a corporation (pay). But at its heart are the bloggers themselves, a collection of very different writers who at any time could spin off and launch their own brands. That is the danger of the model, but also the proof that the bloggers are “sticky”. That is, they are well received locally and can draw an audience.

What Patch does best is provide serves such as its mobile app and web hosting. What it does less well is recruit and maintain its staff of reporters and editors. No more proof is needed in this regard than that fact that when the time came those that were laid off were at that level. By this point in time Patch should be able to manage if all its corporate managers were laid off but the staff remains. Instead, AOL retained its corporate structure – though it has now brought in a new CEO – while dumping is editors and many of its sites.

Like many start-ups, the first thing that is built is the corporate structure, building a wall of costs very high that the company hopes it one day can climb over to achieve profits. It’s an old story of top down thinking common to many start-ups. The company executives see themselves as the heart of the company, everyone else is interchangeable.

Just yesterday I wrote that one of the issues at modern newspapers is that they failed to grasp digital and that one proof is of this is that local bloggers have always been seen as competition, rather than an asset. Rather than incorporating them into a structure where the paper can take advantage of their content, while providing services back to the blogs, newspapers have let them continue to draw off readers. Newspapers, I argue, could create their own FiveThirty Eights.

I do not know what percentage of the total costs of running Patch is corporate overhead, but I am quite sure that the money paid to the executives in Dulles or NYT equals many Patch editors. Looking at the P&L of one of the magazines I published a decade or more ago I see that in a really good year, one where profits were booming, the amount of money devoted to corporate expenses were equal to 15 percent of total revenue, or equal to one third of total profits. The year prior, with revenue not so high, they equaled 18 percent of revenue, and were equal to 50 percent of total profit. Even in a good year, corporate costs were high. I imagine that at Patch they are so high that the idea that any profit at all could be achieved seems remote right now.

Comments are closed.