NEW PATCH OWNER HALE RUNNING COMPANY IN 'LEAN, ENTREPRENEURIAL MODE
March 06, 2014
After a tumultuous and mostly unprofitable three-and-a-half years under media giant Aol, hyperlocal publishing network Patch was acquired in January by Hale Global, a holding company that specializes in turnarounds, mostly with technology firms. Having lost hundreds of millions of dollars as it mushroomed into a nationwide network of 900 sites, Patch was ready for a turnaround. To find out how and where it's going after 30 days, I put these questions to Hale Global co-founder and CEO Charles Hale:
What's the new Patch's mission?
Patch's mission is to provide high-quality and highly relevant local news to the towns we serve, and to act as a digital town square that helps users connect with each other in ways that strengthen their communities.
The difference between the old Patch and the new Patch is that we don't have the pockets of a large corporation. We've got to run Patch the way so many of our advertisers run their small businesses – in a lean, entrepreneurial mode.
What's your model for making Patch work editorially?
We think there are alternatives to the traditional hyperlocal model that starts with a single local editor and sales person in each community and builds coverage up from there. Under that model, you've created a great deal of overhead before selling a single ad, and you're essentially betting that over time you can build that arrangement into a business that can support itself. If that bet goes wrong, and if you make it across hundreds of sites, the losses can add up quickly.
We think there's an opportunity to start with a steady flow of local news from a slightly higher level [geographically and market-wise] which then grows down into communities that can support it, while still serving communities and clusters of communities with local news, even if they don't have the advertising base to support a unique editor. We also want to make more of the great stories our editors find in the communities they cover.
There was a belief in the old Patch that a story – even a wildly interesting one – should more or less remain on the Patch where it originated. We disagree. If one of our hard-working editors discovers the next potential viral hit, we want to share it with the world.
Some Patch critics have asserted that local doesn't scale. What's your view?
That's really an ideological argument, not a business one. And frankly, it doesn't solve the riddle of hyperlocal news. If it's true that local doesn't scale, the flip side of that is that communities that can't support local – either because of their small population or limited advertising base – can't have local news.
If local can scale — and we know it can — then many more communities can receive a valuable flow of local news, even those that might not be able to support a traditional on-the-ground hyperlocal reporter. There are lots of potential models, and there's no reason to be ideological about finding the right match between models and communities. The best thing for hyperlocal journalism is a sustainable business model.
Some observers say that news, especially at the community level, can be produced more efficiently, and with no loss in value, if editors spent more time doing what's been called “high-level curating” and tuning into conversations on social media platforms, like Facebook and Twitter. The idea is that those conversations are often not just a reaction to news but a wholly new product. Do you agree?
There's a loop between the conversations in a community and the news from a community. News fuels conversation, but conversations about matters of local importance can drive the news.
There are lots of ways to access those conversations. Sitting in a cafe or diner interviewing people is one way. Listening to them on social media or through email is another. Picking up the phone the way reporters have for decades is another. We're not dogmatic about how our reporters engage with their communities. The most important thing is that they engage, period. And that also means doing original reporting that has value for the community.
Given all the turmoil at the old Patch, and the layoffs during the transition period, do you have a morale problem?
From what we can tell, morale has been incredible. People seem to feel released from the bonds of a big corporation and particularly excited about self-determination. They are also excited by the product innovation our in-house "Patch Labs" team has in internal testing.
We're a growth company now. We're hiring. We're not waiting around for the ax to fall or to have some bad news confirmed. We're more of a start-up. Everyone at Patch has an incredible amount of responsibility. We don't have a lot of managers micro-managing our teams – we're turning loose talented people and telling them "Do your job the way it ought to be done." And when you have talented people who are freed up from a lot of mindless directives, you can get incredible work – which we have. Our reporters have been doing an absolutely amazing job in difficult circumstances, producing hundreds of stories a day, day-in and day-out.
There's something else at work here too. We've got something to prove. The media has been writing Patch's obituary for years. We've found "Patch is dead" stories that were published in 2011. David Carr wrote Patch's obituary in The New York Times last fall. After the spin-off from AOL, there were dozens of stories saying Patch was toast.
But in fact we're doing pretty well. We've hired six editors in the last 10 days, and we're in conversations with several more right now. We produced 900 posts on Patch last Friday. Our ad sales team absolutely crushed it in February. Our traffic is holding up remarkably well. Thousands of users are commenting and blogging our sites every day. Our mobile traffic is robust and our daily newsletters continue to have impressive open rates. We've got plenty of challenges for sure — starting with our platform, which we're completely redesigning — but the mood here is pretty determined and fired up.
What's your model for making Patch succeed as a business, including staffing in smaller markets? Is your network being scaled with "different" Patches, based on the size of the market and other factors?
The problem of hyperlocal always gets back to the cost-of-sale for local advertising. It just costs a lot more to go door-to-door selling ads to small businesses than it does to sell regionally or nationally. Many small business owners aren't familiar with online advertising, so you have to invest in training them. Many are too busy running their businesses to update their various online or mobile presences. And every town, and indeed every business is unique.So any one-size-fits-all approach is going to have a hard time succeeding.
A great thing about Patch is that we have 900 sites. We can test out various models, such as sharing local revenue with Patch editor-publishers on a handful of our sites, and assess the data before making the decision to roll out a model across the network. We've already begun that process.
Do you have separate ad sales programs for local and regional and national?
We do. We have an inside sales team, outside sales, regional and national sales. We only have four weeks of sales data to go on since the creation of the new Patch, which isn't a lot. But we are very, very happy with what they've been able to accomplish.
You clearly have a smaller editorial staff than the old Patch. How big is it now, and is it big enough to meet your mission in the communities you want to serve?
We have around 125 employees at Patch now, the majority of whom are in editorial. We've been hiring at a steady clip. We've had some of our most loyal bloggers step in to edit smaller Patches. And we've given our editors an ability to post relevant news across multiple Patches, which under the old model was discouraged. We've worked hard on the mapping to make sure editors are strategically deployed to make the most of their presence near multiple Patches. So we feel pretty good about where we are. At the same time, we know we need to expand and deepen our coverage especially in areas where some Patches have yet to get momentum. So that's a long-term effort.
You've got a month under your belt. How is your audience responding, based on traffic numbers?
We're holding steady at 90% of pageviews of the old Patch and 85% of unique visitors. And this is coming out of a tumultuous transition, so we're just getting started.
How close would you estimate you are to becoming profitable?
We were cash-flow and EBITDA positive in February. That's possibly the first profitable month in Patch's history.
Will Hale Global be growing Patch in more communities?
Absolutely. But when we expand, it will be through a careful and deliberate effort — into communities we know want a Patch.
Any plans for partnerships with other community news providers?
We're working on it. One thing we're committed to trying to change is the idea that Patch is some sort of outside competitor to hyperlocal bloggers or news sites. Hyperlocal is not a zero-sum game. There's too much unclaimed territory, and even those who have built audiences in individual communities want more readers and better exposure.
There's no reason a successful hyperlocal news site operator in a given community couldn't also run the local Patch. They'd benefit from cross-linking on both sites, and might expand their audience and potential advertising base, while also having an opportunity to promote local stories that have national import across a much larger platform. We want to support local voices, period.
Tom Grubisich (@TomGrubisich) writes "The New News" column for Street Fight. He is editorial director of the in-development hyperlocal news network Local America that will rate communities on their performance across a broad spectrum of livability. He will present the site’s new demo on Charleston, S.C., at the DIG SOUTH 2014 interactive festival in Charleston on April 9-13, 2014.