AOL seeks to fill need for local news with online news site Patch

By Norman Gomlak
Monday, May 3, 2010

AOL Inc. is apparently gearing up to launch dozens of community news sites in the Washington-Baltimore area, part of an aggressive push to fill the void left by newspaper cutbacks and to tap the region's local online ad spending.

Patch, a network of "hyper-local" news sites that AOL acquired last year, last month began soliciting for about 75 local editors in communities such as Chevy Chase, Ellicott City, Alexandria's Del Ray neighborhood and Reston. The only District site identified so far on Simply Hired, the job board where the listings appeared early last week, was for Georgetown.

AOL now operates about 50 Patch news sites in five states. The Patch sites resemble hometown newspapers, with items on town council and school board meetings, crime, business openings, births and coming events. But Patch also aims to make greater use of video and Twitter and to generate more user involvement, all without the overhead costs of printing and distributing a paper.

Warren Webster, president of Patch, declined to comment on the division's plans for the Washington area in an e-mail. "We're not quite ready to discuss future launches," Webster wrote.

A corporate spokeswoman said she did not know the timetable for a launch in the D.C. area.

But in an annual report filed recently with the Securities and Exchange Commission, AOL revealed plans to spend up to $50 million to expand Patch nationally by the end of the year. Officials cited "significant economic challenges" that face metropolitan area newspapers that have traditionally been a resource for smaller communities.

"In order to take advantage of these dynamics we intend to significantly invest in this area and establish online destinations that provide comprehensive news, events and directories at the community level," AOL officials wrote.

John Morton, a newspaper analyst based in Silver Spring, said it's unclear whether local online news ventures can succeed financially. He said online advertising has yet to generate the revenue needed by newspapers, which have suffered from falling circulation and print advertising revenue.

"Really what is required for any of this to be established and to continue is some kind of a workable business model, and so far no one has come up with one," Morton said.

AOL thinks it has found one in Patch, which it bought last year for $7 million. An original investor in Patch was Tim Armstrong, a former journalist who is now AOL's 39-year-old chairman and chief executive; he waived his right to receive any money beyond his original, indirect $4.5 million investment, the annual report says.

AOL is not the only company delving into the region's online local news market. Allbritton Communications, owner of WJLA-TV and Politico, is now hiring reporters and editors for a local news site that it is calling TBD -- for "To Be Determined." It is headed by Jim Brady, an AOL alum who directed The Washington Post's online news efforts from 2004 until early 2009.

The Washington Post itself is beefing up its local news offerings online, and it recently launched Capital Business to target the region's business community..


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