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Feb 3, 2014
FUTURE OF FIRING?
1
It’s Nothing Personal: Hundreds Of Patch Employees Laid-Off During Conference Call
By Ashlee Kieler February 3, 2014
Conference Call Canning
If you’re going to fire hundreds of employees, at least have the guts to do so individually. After years of dedicated, time-consuming work, hundreds of online media employees were let go during a series of conference calls last week; taking “it’s nothing personal” to an entirely new level.
On Wednesday, hundreds of Patch editors were laid off during what can only be described as an impersonal rehearsed conference call.
The lay-offs leave only a few hundred employees to maintain more than 900 hyper-local sites, the New York Times reports.
With hundreds of employees across the country, maybe it’s safe to assume the higher-ups at Patch just wanted to get the bad news over with so they used a conference call? But still, such an informal “thanks for your work, but you’re no longer needed” message has to sting.
Still, the cold touch and complete disregard to the editors and advertising sales representatives is alarming. Although, maybe not totally unexpected. Remember when CEO Tim Armstrong fired an employee during an all-company call last year?
Media blogger Jim Romenesko posted a transcript and recording of the conference call on his site.
Patch Chief Operations Officer, Leigh Zarelli Lewis provided the straight-forward firing to employees:
“Patch is being restructured in connection with the creation of a joint venture with Hale Global. Hale Global has decided which Patch employees will receive an offer of employment to move forward in accordance with their vision for Patch and which will not. Unfortunately, your role has been eliminated and you will no longer have a role at Patch and today will be your last day of employment with the company.”
The news of lay-offs, billed as a reorganization, came just weeks after the company was sold to Hale Global. It remains to be seen what exactly Hale has in store for the remnants of Patch.
Wednesday’s cuts come after another significant round of lay-offs in August. However, many of those employees were allowed to stay on with the company until October.
The hyper-local news organization was once a shining star for AOL CEO Tim Armstrong. Armstrong helped to create Patch and later assisted in its purchase by AOL in 2009.
In December, Armstrong seemed optimistic on the future of Patch, saying the company had more digital traffic than many traditional media players.
Still, after losing hundreds of millions of dollars, Patch’s time was clearly running out this last December. After making a pledge to AOL investors that Patch would be profitable by the end of 2013, Armstrong was forced to go back on this promise and the majority stake of the company was sold to Hale Global.
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Listen when Patch lays off hundreds of employees on a conference call
Posted on January 31, 2014 | By jbalise@sfgate.com (Julie Balise)
The hyperlocal media world took another blow on Wednesday when hundreds of Patchemployees were laid off by new owner Hale Global.
Media blogger Jim Romenesko obtained an audio track of the 10 a.m. conference call (listen below) in which the layoffs were announced. Patch chief operating officer Leigh Zarelli Lewis begins by saying Patch is being restructured as part of its joint venture with Hale Global, which bought a majority stake in the company from AOL earlier this month.
The site’s new owner had decided which Patch employees would keep their positions and which would be laid off, Lewis says.
Employees on that call were part of the latter group, with their dismissal effective that day. Lewis explains that they will receive an e-mail after the call from human resources explaining their separation benefits.
“Hale and AOL appreciate everyone’s hard work and commitment to this point in building Patch into the business it is today,” Lewis says in the recording.
The call feels like a scene (Warning: The scene contains graphic language) out of “Up in the Air,” the 2009 movie starring George Clooney and Anna Kendrick. Kendrick’s character extols the virtues of dismissing workers via video chat. One laid-off worker curses at her and is then told to review a packet of information in front of him.
Patch was launched in December 2007 and acquired by AOL shortly after Tim Armstrong became chief executive in 2009. It now operates 900 local and hyperlocal websites, a number that will not change after the recent layoffs, according to reports.
See article at: blog.sfgate.com/gettowork/2014/01/31/listen-to-when-patch-lays-off-hundreds-of-employees-on-a-conference-call/
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THE MEDIA EQUATION
AOL Chief’s White Whale Finally Slips His Grasp
Jessica Rinaldi/Reuters
Tim Armstrong of AOL helped found Patch in 2007. When he took over AOL in 2009, he persuaded the company to buy it.
By DAVID CARR Published: December 15, 2013
Tim Armstrong, the chief executive of AOL, is finally winding down Patch, a network of local news sites that he helped invent and that AOL bought after he took over.
At a conference in Manhattan last week, Mr. Armstrong suggested that Patch’s future could include forming partnerships with other companies, an acknowledgment that AOL could not continue to go it alone in what has been a futile attempt to guide Patch to profitability. He called it, somewhat hilariously, “an asset with optionality.” There may be a few options for Patch, but none come close to the original vision for the site.
The hunt to own the lucrative local advertising market, Mr. Armstrong’s white whale, is over. But Patch did not go quietly — hundreds of people lost their jobs over the last six months — and neither will Mr. Armstrong.
“Patch has more digital traffic than a lot of traditional players have,” he said in a phone call on Friday, still defending his pet project. “The long-term vision was clear: If you get the consumer, can you get the revenue? And we have a whole bunch of Patches where the answer is yes. But we rolled it out on a national basis and we’ve had to adjust based on the investor commitments that we have made.”
As he spoke, he said that the turnaround at AOL as a whole was going well, and the market seems to agree — the stock is up 45 percent this year and advertising revenue has gone up every quarter. He said that overcoming the worst merger in business history — the company was finally spun out from Time Warner in 2009 — required “big bets in white spaces of opportunity,” some of which worked out, and some, like Patch, that didn’t.
But Patch was not just one more bet. When the boss has a big idea, the employees treat it as the more equal among equals.
That is not how things usually go when a digital executive is in charge of a company. Silicon Valley is built on a series of rapid failures until a winner emerges. It is a fundamental tenet of the digital era that the losers are quickly shot and slid off into the river. “Fail fast forward” as the saying goes.
But Mr. Armstrong had a sentimental, and some would say debilitating, attachment to Patch. He helped create it in 2007 while a senior executive at Google. When he got the top job at AOL in 2009, he persuaded the company to buy it. Patch then proceeded to churn through leadership, business models and write-downs on the way to its reduced state.
The board of AOL, handpicked by Mr. Armstrong, authorized him to invest $50 million on the idea in 2010 and after that, it became a black hole for cash. By the end, it had cost an estimated $300 million. (AOL said the figure was more like $200 million.)
Mr. Armstrong’s big dream had become a nightmare that wore out his shareholders and set off a proxy fight in 2012. The hedge fund Starboard Value L.P. ran for three seats on AOL’s board, saying it did not believe Patch was a “viable business.”
The insurgents lost the war, but turned out to be right. Mr. Armstrong was able to keep the peace with other AOL investors in part by engineering a $1.1 billion sale of AOL patents to Microsoft and returning much of that value to the shareholders, but the additional time — or was it rope? — that he secured did not change the outcome at Patch.
Analysts who follow the company are less interested in Patch than in Mr. Armstrong’s management of the broader enterprise, and several I spoke to give him high marks, even counting Patch.
“He has been very transparent,” said Benjamin Schachter, a media analyst at the Macquarie Group. “He made it clear to investors that Patch was going to take a lot of resources to make this business work, that there were significant challenges. While it has been clear that it has been very difficult for him — he really wanted it to work — he told investors he would make the necessary cuts if it didn’t and now he is.”
As a graduate of the Google school of dreaming big — when he worked there, Mr. Armstrong helped expand a sales force that clobbered much of the rest of the media economy — Mr. Armstrong is nothing if not a true believer. Even though Patch is being dismantled or perhaps sold off to various partners, he still believes that he had the right product in the right space, and that he just ran out of runway.
That runway ended because of a schedule he set. In May 2012, he promised restive investors on an earnings call that he would make Patch profitable by the end of 2013. That page of the calendar arrives this month while profitability remains on a far shore, so Mr. Armstrong is reluctantly throwing in the towel.
“At the end of the day, could Patch have been run better? We don’t know,” he said. “We were doing this while we navigated turning around the rest of the company. Patch was one of the big bets that we made, among others, and I still believe local will be a big opportunity whether it is Patch or someone else.”
The theory was that Patch would use a single news person and a single advertising person, at least initially, to create a digital maypole in hundreds of communities at a cost of about $100,000 annually per site. Patch sites popped up across the country, like Calabasas, Calif., and Nashua, N.H., covering high school sports, city elections and other local fare.
The execution risk was large — Patch was all moving parts, many undermanaged. At its peak, some 900 sites employed 1,400 people. Much of the journalism was pedestrian, while some of it, especially during Hurricane Sandy, was deeply important, but the decision to start at such a large scale was crippling. And all local efforts, digital or not, confront the tyranny of small numbers. Both the journalism and the ad sales were hand-to-hand, a retail effort that required spending a lot of money to go after pretty small revenue.
In August, it was clear that the math would not work. More than 350 people at Patch were laid off and hundreds of sites were shuttered. Just in case observers did not understand that it was an emotional moment for Mr. Armstrong, two minutes into a companywide meeting explaining the closings, he publicly fired Abel Lenz, the creative director of Patch, for taking a picture of him. It was embarrassing for everyone, and he apologized several days later.
Mr. Armstrong came close to betting the company and his future on Patch, but in the end, his survival instincts and shareholder pressure compelled him to let the white whale swim away.
But he still cannot quite admit that it is over. In the phone call on Friday, Mr. Armstrong talked about impending partnerships and stressed that Patch was “moving toward” profitability. Patch, even in its death throes, is ever nascent, still rising, on its way to a future only its founder sees.
Email: carr@nytimes.com
Full article at: www.nytimes.com/2013/12/16/business/media/aol-chiefs-white-whale-finally-slips-his-grasp.html?_r=2&
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Despite High Hopes For Patch, AOL Is Now Winding Down The Hyperlocal News Site
By Mary Beth Quirk December 16, 2013
The dream is over.
It all started out so optimistic: When AOL’s chief executive Tim Armstrong came onboard from Google, his dream of a network of local news sites that would cover all the comings and goings of communities across the country seemed like it could work out. Patch got $50 million and the high hopes of its fans at AOL in 2009, but now the company says its days are numbered.
Armstrong doesn’t sound like he’s entirely giving up on Patch, notes the New York Times’ David Carr, pointing out that he called it “an asset with optionality” last week.
“Patch has more digital traffic than a lot of traditional players have,” he said in a phone call on Friday, still defending his pet project. “The long-term vision was clear: If you get the consumer, can you get the revenue? And we have a whole bunch of Patches where the answer is yes. But we rolled it out on a national basis and we’ve had to adjust based on the investor commitments that we have made.”
Patch has lost hundreds of millions since it started and laid off hundreds of workers, according to reports, and no matter what happens next, it won’t be what Armstrong envisioned.
That vision was getting the local news to consumers in order to sell local advertising right along with it. And Armstrong wasn’t the only one who believed it could work, a former Patch editor tells Consumerist of the Patch dream.
“I bought into the idea of Patch,” she tells Consumerist. “I drank the Koolaid, and for a long time it was awesome. In the areas I covered, Patch really did seem to make a difference. People loved the daily local news.”
But despite that positivity, she says it soon became apparent as time wore on that AOL saw Patch as a failure, and with that kind of attitude, it was going to fail.
“Those that had championed the product were jumping ship, and that didn’t leave much hope for the rest of us,” she recalls.
Patch isn’t making AOL’s investors any money, and part of that could be because though the product might’ve been right, there just wasn’t enough time — Armstrong had promised investors in May 2012 that he could make it profitable by the end of 2013. We’re there now, and profitablity isn’t in sight.
That short timeline is definitely part of the problem, the former editor tells Consumerist. Basically, it was a nice dream while it lasted, but it needed more time.
“I think Patch was given a small window in which to succeed, but with rushed expansions and a deadline to be profitable, it wasn’t an adequate amount of time,” she says. “The idea of Patch was great and something a lot of people could get behind. However, the execution is beyond disappointing.”
While Patch is on its last legs, it’s not over until Armstrong says it’s over. And as of Friday, he still insists it’s “moving toward” profitability with new partnerships.
“At the end of the day, could Patch have been run better? We don’t know,” he said. “We were doing this while we navigated turning around the rest of the company. Patch was one of the big bets that we made, among others, and I still believe local will be a big opportunity whether it is Patch or someone else.”
Read full article at: consumerist.com/2013/12/16/despite-high-hopes-for-patch-aol-is-now-winding-down-the-hyperlocal-news-site/
==========================================================================
Patch Hit With Sweeping Layoffs As New Owner Hale Global Restructures
Posted Jan 29, 2014 by Matt Burns
techcrunch.com/2014/01/29/patch-hit-with-sweeping-layoffs-as-new-owner-hale-global-restructures/
The ax came down at Patch today. TechCrunch has confirmed that a number of Patch employees were let go this morning with another round of layoffs happening later today. We’re hearing hundreds were laid off, focused mainly around editorial staffing. Employees are being told to pack their virtual desks and clear the premises today.
This is the second major round of layoffs in six months — 400 Patch employees were let go last August.
The effected employees will receive their yearly Aol bonuses, a payout for accrued vacation time and two months’ severance. By taking the severance package, the employees are agreeing not to sue Aol.
“This is sad but didn’t really come as a surprise to many if not all of us,” one fired Patch employee told TechCrunch today. “Everyone gave it their best shot, but in the end no one could make the numbers add up. They treated us well, even as we headed out the door, so personally I have no complaints.”
As Jim Romenesko reported this morning, Patch is being restructured in connection with the creation of the joint venture with Hale Global. Some employees will be kept on and fill unspecified roles at Hale Global.
Aol sold a majority stake in its hyperlocal news outlet to Hale Global on January 15th. Aol retained a minority stake. At the time, Aol stated that they were spinning out the brand.
Patch had long been a sore spot on Aol’s balance sheet. The outlet failed to become profitable after Aol acquired it in 2009. Patch is estimated to have cost Aol between $200 million and $300 million to run.
In 2012 Aol CEO Tim Armstrong made a commitment to turn Patch around. In 2013, sites were consolidated or closed and staffing was cut. Still, nothing seemed to help. Despite the belt tightening, Patch remained a monstrosity of a network, spanning over 900 local blogs.
These layoffs do not come as much of a surprise. Patch was burning through money and Hale Global wouldn’t have purchased it without a plan to turn it around. Laying off hundreds of employees is a quick way to shore up the balance sheet.
=================================================================
From:
www.businesswire.com/news/home/20140115006284/en/AOL-Partner-Hale-Global-Patch#.UvGIT5tVsVU
AOL to Partner with Hale Global on Patch
-- Companies Create Joint Venture to Pursue $152 Billion* Local Media Market --
January 15, 2014 04:01 PM Eastern Standard Time
NEW YORK--(BUSINESS WIRE)--AOL Inc. (NYSE: AOL) and Hale Global announced today the creation of a joint venture to run Patch, the premier platform for local news and information in the United States that serves more than 16 million people monthly** with a network of more than 900 sites. Under the terms of the agreement, AOL will contribute Patch into a new limited liability company, which will be operated and majority owned by Hale Global.
“Hale Global has a strong track record of operational excellence and platform experience, and we are looking forward to working closely with them on Patch”
Hale Global brings substantial experience in the areas of online media, local marketing, mobile, retail, and advertising and has an impressive track record for re-defining company visions and creating long-term growth from the companies they operate.
AOL and Hale Global believe residents of all communities should be empowered through technology to stay connected and informed. The companies are committed to re-launching Patch as an efficient platform that allows citizens and businesses to create and share locally-themed news and content -- not just with those in their own communities but to the wider world.
Among the concepts planned for Patch moving forward:
Technology solutions to make community participation seamless
Mobile-first experience with social integration
National, regional, and local advertising self-service tools
Geo-targeted advertising products
“We are committed to bringing users, local businesses, writers and advertisers together into a Patch experience full of innovation and growth,” said Charles Hale, CEO of Hale Global. “Along with AOL, we are committed to taking the necessary steps to ensure Patch remains a vibrant part of the community.”
“We are impressed by the commitments from Patch and AOL to serve communities and advertisers and look forward to working together to achieve our shared long-term vision.”
“Patch is an important source of information for communities, and the joint venture we created has a unified mission to provide local platforms and hyper-local content,” said Tim Armstrong, Chairman and CEO of AOL. “AOL has established leading positions in attractive scaled opportunities including video, brands, advertising and subscriptions by making bold bets and strategically investing in these high-growth opportunities -- and local will be a growth space during the next decade of the Internet.”
“Hale Global has a strong track record of operational excellence and platform experience, and we are looking forward to working closely with them on Patch,” Armstrong said. AOL will retain a minority interest in Patch.
The companies anticipate closing the joint venture early in the first quarter of 2014, subject to customary closing conditions. Financial terms of the transaction were not disclosed.
* BIA/Kelsey’s US Local Media Annual Forecast, November 2013
** ComScore Multiplatform, November 2013
About Hale Global
Hale Global is an investment holding company with a 13-year track record as a buyer and partner of choice for growth-technology special situations, including underperforming divestitures from corporate parents. The firm brings extensive in-house software and mobile development teams, turnaround skills predicated upon product innovation, and a deep operational bench. More information about Hale Global can be found at www.haleglobal.com.
About AOL
AOL Inc. (NYSE: AOL) is a brand company, committed to continuously innovating, growing, and investing in brands and experiences that inform, entertain, and connect the world. The home of a world-class collection of premium brands, AOL creates original content that engages audiences on a local and global scale. We help marketers connect with these audiences through effective and engaging digital advertising solutions.
Forward Looking Statements
This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding business strategies, market potential, future financial and operational performance and other matters. Words such as “anticipates,” “estimates,” “expects,” “projects,” “forecasts,” “intends,” “plans,” “will,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify forward-looking statements. These forward-looking statements are based on management’s current expectations and beliefs about future events. As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances. Except as required by law, we are under no obligation to, and expressly disclaim any obligation to, update or alter any forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise.
Various factors could adversely affect our operations, business or financial results in the future and cause our actual results to differ materially from those contained in the forward-looking statements, including those factors discussed in detail in the “Risk Factors” sections contained in our Annual Report on Form 10-K for the year ended December 31, 2012 (the “Annual Report”) and in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 (the “Quarterly Report”), filed with the Securities and Exchange Commission. In addition, we operate a media and technology company in a highly competitive, rapidly changing and consumer- and technology-driven industry. This industry is affected by government regulation, economic, strategic, political and social conditions, consumer response to new and existing products and services, technological developments and, particularly in view of new technologies, the continued ability to protect intellectual property rights. Our actual results could differ materially from management’s expectations because of changes in such factors. Achieving our business and financial objectives, including improved financial results and maintenance of a strong balance sheet and liquidity position, could be adversely affected by the factors discussed or referenced under the “Risk Factors” sections contained in the Annual Report and Quarterly Report as well as, among other things:
1) changes in our plans, strategies and intentions;
2) stock price volatility;
3) future borrowing and restrictive covenants under the new revolving credit facility;
4) the impact of significant acquisitions, dispositions and other similar transactions;
5) our ability to attract and retain key employees;
6) any negative unintended consequences of cost reductions, restructuring actions or similar efforts, including with respect to any associated savings, charges or other amounts;
7) market adoption of new products and services;
8) our ability to attract and retain unique visitors to our properties;
9) asset impairments; and 10) the impact of “cyber espionage.”
Contacts
AOL Communications
Peter Land
Senior Vice President, Corporate Communications
212-206-5009
peter.land@teamaol.com
or
AOL Investor Relations
Eoin Ryan
Senior Vice President, Investor Relations
212-206-5025
eoin.ryan@teamaol.com
or
Hale Global
212-840-3900
media@haleglobal.com
Feb 3, 2014
FUTURE OF FIRING?
1
It’s Nothing Personal: Hundreds Of Patch Employees Laid-Off During Conference Call
By Ashlee Kieler February 3, 2014
Conference Call Canning
If you’re going to fire hundreds of employees, at least have the guts to do so individually. After years of dedicated, time-consuming work, hundreds of online media employees were let go during a series of conference calls last week; taking “it’s nothing personal” to an entirely new level.
On Wednesday, hundreds of Patch editors were laid off during what can only be described as an impersonal rehearsed conference call.
The lay-offs leave only a few hundred employees to maintain more than 900 hyper-local sites, the New York Times reports.
With hundreds of employees across the country, maybe it’s safe to assume the higher-ups at Patch just wanted to get the bad news over with so they used a conference call? But still, such an informal “thanks for your work, but you’re no longer needed” message has to sting.
Still, the cold touch and complete disregard to the editors and advertising sales representatives is alarming. Although, maybe not totally unexpected. Remember when CEO Tim Armstrong fired an employee during an all-company call last year?
Media blogger Jim Romenesko posted a transcript and recording of the conference call on his site.
Patch Chief Operations Officer, Leigh Zarelli Lewis provided the straight-forward firing to employees:
“Patch is being restructured in connection with the creation of a joint venture with Hale Global. Hale Global has decided which Patch employees will receive an offer of employment to move forward in accordance with their vision for Patch and which will not. Unfortunately, your role has been eliminated and you will no longer have a role at Patch and today will be your last day of employment with the company.”
The news of lay-offs, billed as a reorganization, came just weeks after the company was sold to Hale Global. It remains to be seen what exactly Hale has in store for the remnants of Patch.
Wednesday’s cuts come after another significant round of lay-offs in August. However, many of those employees were allowed to stay on with the company until October.
The hyper-local news organization was once a shining star for AOL CEO Tim Armstrong. Armstrong helped to create Patch and later assisted in its purchase by AOL in 2009.
In December, Armstrong seemed optimistic on the future of Patch, saying the company had more digital traffic than many traditional media players.
Still, after losing hundreds of millions of dollars, Patch’s time was clearly running out this last December. After making a pledge to AOL investors that Patch would be profitable by the end of 2013, Armstrong was forced to go back on this promise and the majority stake of the company was sold to Hale Global.
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Listen when Patch lays off hundreds of employees on a conference call
Posted on January 31, 2014 | By jbalise@sfgate.com (Julie Balise)
The hyperlocal media world took another blow on Wednesday when hundreds of Patchemployees were laid off by new owner Hale Global.
Media blogger Jim Romenesko obtained an audio track of the 10 a.m. conference call (listen below) in which the layoffs were announced. Patch chief operating officer Leigh Zarelli Lewis begins by saying Patch is being restructured as part of its joint venture with Hale Global, which bought a majority stake in the company from AOL earlier this month.
The site’s new owner had decided which Patch employees would keep their positions and which would be laid off, Lewis says.
Employees on that call were part of the latter group, with their dismissal effective that day. Lewis explains that they will receive an e-mail after the call from human resources explaining their separation benefits.
“Hale and AOL appreciate everyone’s hard work and commitment to this point in building Patch into the business it is today,” Lewis says in the recording.
The call feels like a scene (Warning: The scene contains graphic language) out of “Up in the Air,” the 2009 movie starring George Clooney and Anna Kendrick. Kendrick’s character extols the virtues of dismissing workers via video chat. One laid-off worker curses at her and is then told to review a packet of information in front of him.
Patch was launched in December 2007 and acquired by AOL shortly after Tim Armstrong became chief executive in 2009. It now operates 900 local and hyperlocal websites, a number that will not change after the recent layoffs, according to reports.
See article at: blog.sfgate.com/gettowork/2014/01/31/listen-to-when-patch-lays-off-hundreds-of-employees-on-a-conference-call/
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THE MEDIA EQUATION
AOL Chief’s White Whale Finally Slips His Grasp
Jessica Rinaldi/Reuters
Tim Armstrong of AOL helped found Patch in 2007. When he took over AOL in 2009, he persuaded the company to buy it.
By DAVID CARR Published: December 15, 2013
Tim Armstrong, the chief executive of AOL, is finally winding down Patch, a network of local news sites that he helped invent and that AOL bought after he took over.
At a conference in Manhattan last week, Mr. Armstrong suggested that Patch’s future could include forming partnerships with other companies, an acknowledgment that AOL could not continue to go it alone in what has been a futile attempt to guide Patch to profitability. He called it, somewhat hilariously, “an asset with optionality.” There may be a few options for Patch, but none come close to the original vision for the site.
The hunt to own the lucrative local advertising market, Mr. Armstrong’s white whale, is over. But Patch did not go quietly — hundreds of people lost their jobs over the last six months — and neither will Mr. Armstrong.
“Patch has more digital traffic than a lot of traditional players have,” he said in a phone call on Friday, still defending his pet project. “The long-term vision was clear: If you get the consumer, can you get the revenue? And we have a whole bunch of Patches where the answer is yes. But we rolled it out on a national basis and we’ve had to adjust based on the investor commitments that we have made.”
As he spoke, he said that the turnaround at AOL as a whole was going well, and the market seems to agree — the stock is up 45 percent this year and advertising revenue has gone up every quarter. He said that overcoming the worst merger in business history — the company was finally spun out from Time Warner in 2009 — required “big bets in white spaces of opportunity,” some of which worked out, and some, like Patch, that didn’t.
But Patch was not just one more bet. When the boss has a big idea, the employees treat it as the more equal among equals.
That is not how things usually go when a digital executive is in charge of a company. Silicon Valley is built on a series of rapid failures until a winner emerges. It is a fundamental tenet of the digital era that the losers are quickly shot and slid off into the river. “Fail fast forward” as the saying goes.
But Mr. Armstrong had a sentimental, and some would say debilitating, attachment to Patch. He helped create it in 2007 while a senior executive at Google. When he got the top job at AOL in 2009, he persuaded the company to buy it. Patch then proceeded to churn through leadership, business models and write-downs on the way to its reduced state.
The board of AOL, handpicked by Mr. Armstrong, authorized him to invest $50 million on the idea in 2010 and after that, it became a black hole for cash. By the end, it had cost an estimated $300 million. (AOL said the figure was more like $200 million.)
Mr. Armstrong’s big dream had become a nightmare that wore out his shareholders and set off a proxy fight in 2012. The hedge fund Starboard Value L.P. ran for three seats on AOL’s board, saying it did not believe Patch was a “viable business.”
The insurgents lost the war, but turned out to be right. Mr. Armstrong was able to keep the peace with other AOL investors in part by engineering a $1.1 billion sale of AOL patents to Microsoft and returning much of that value to the shareholders, but the additional time — or was it rope? — that he secured did not change the outcome at Patch.
Analysts who follow the company are less interested in Patch than in Mr. Armstrong’s management of the broader enterprise, and several I spoke to give him high marks, even counting Patch.
“He has been very transparent,” said Benjamin Schachter, a media analyst at the Macquarie Group. “He made it clear to investors that Patch was going to take a lot of resources to make this business work, that there were significant challenges. While it has been clear that it has been very difficult for him — he really wanted it to work — he told investors he would make the necessary cuts if it didn’t and now he is.”
As a graduate of the Google school of dreaming big — when he worked there, Mr. Armstrong helped expand a sales force that clobbered much of the rest of the media economy — Mr. Armstrong is nothing if not a true believer. Even though Patch is being dismantled or perhaps sold off to various partners, he still believes that he had the right product in the right space, and that he just ran out of runway.
That runway ended because of a schedule he set. In May 2012, he promised restive investors on an earnings call that he would make Patch profitable by the end of 2013. That page of the calendar arrives this month while profitability remains on a far shore, so Mr. Armstrong is reluctantly throwing in the towel.
“At the end of the day, could Patch have been run better? We don’t know,” he said. “We were doing this while we navigated turning around the rest of the company. Patch was one of the big bets that we made, among others, and I still believe local will be a big opportunity whether it is Patch or someone else.”
The theory was that Patch would use a single news person and a single advertising person, at least initially, to create a digital maypole in hundreds of communities at a cost of about $100,000 annually per site. Patch sites popped up across the country, like Calabasas, Calif., and Nashua, N.H., covering high school sports, city elections and other local fare.
The execution risk was large — Patch was all moving parts, many undermanaged. At its peak, some 900 sites employed 1,400 people. Much of the journalism was pedestrian, while some of it, especially during Hurricane Sandy, was deeply important, but the decision to start at such a large scale was crippling. And all local efforts, digital or not, confront the tyranny of small numbers. Both the journalism and the ad sales were hand-to-hand, a retail effort that required spending a lot of money to go after pretty small revenue.
In August, it was clear that the math would not work. More than 350 people at Patch were laid off and hundreds of sites were shuttered. Just in case observers did not understand that it was an emotional moment for Mr. Armstrong, two minutes into a companywide meeting explaining the closings, he publicly fired Abel Lenz, the creative director of Patch, for taking a picture of him. It was embarrassing for everyone, and he apologized several days later.
Mr. Armstrong came close to betting the company and his future on Patch, but in the end, his survival instincts and shareholder pressure compelled him to let the white whale swim away.
But he still cannot quite admit that it is over. In the phone call on Friday, Mr. Armstrong talked about impending partnerships and stressed that Patch was “moving toward” profitability. Patch, even in its death throes, is ever nascent, still rising, on its way to a future only its founder sees.
Email: carr@nytimes.com
Full article at: www.nytimes.com/2013/12/16/business/media/aol-chiefs-white-whale-finally-slips-his-grasp.html?_r=2&
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Despite High Hopes For Patch, AOL Is Now Winding Down The Hyperlocal News Site
By Mary Beth Quirk December 16, 2013
The dream is over.
It all started out so optimistic: When AOL’s chief executive Tim Armstrong came onboard from Google, his dream of a network of local news sites that would cover all the comings and goings of communities across the country seemed like it could work out. Patch got $50 million and the high hopes of its fans at AOL in 2009, but now the company says its days are numbered.
Armstrong doesn’t sound like he’s entirely giving up on Patch, notes the New York Times’ David Carr, pointing out that he called it “an asset with optionality” last week.
“Patch has more digital traffic than a lot of traditional players have,” he said in a phone call on Friday, still defending his pet project. “The long-term vision was clear: If you get the consumer, can you get the revenue? And we have a whole bunch of Patches where the answer is yes. But we rolled it out on a national basis and we’ve had to adjust based on the investor commitments that we have made.”
Patch has lost hundreds of millions since it started and laid off hundreds of workers, according to reports, and no matter what happens next, it won’t be what Armstrong envisioned.
That vision was getting the local news to consumers in order to sell local advertising right along with it. And Armstrong wasn’t the only one who believed it could work, a former Patch editor tells Consumerist of the Patch dream.
“I bought into the idea of Patch,” she tells Consumerist. “I drank the Koolaid, and for a long time it was awesome. In the areas I covered, Patch really did seem to make a difference. People loved the daily local news.”
But despite that positivity, she says it soon became apparent as time wore on that AOL saw Patch as a failure, and with that kind of attitude, it was going to fail.
“Those that had championed the product were jumping ship, and that didn’t leave much hope for the rest of us,” she recalls.
Patch isn’t making AOL’s investors any money, and part of that could be because though the product might’ve been right, there just wasn’t enough time — Armstrong had promised investors in May 2012 that he could make it profitable by the end of 2013. We’re there now, and profitablity isn’t in sight.
That short timeline is definitely part of the problem, the former editor tells Consumerist. Basically, it was a nice dream while it lasted, but it needed more time.
“I think Patch was given a small window in which to succeed, but with rushed expansions and a deadline to be profitable, it wasn’t an adequate amount of time,” she says. “The idea of Patch was great and something a lot of people could get behind. However, the execution is beyond disappointing.”
While Patch is on its last legs, it’s not over until Armstrong says it’s over. And as of Friday, he still insists it’s “moving toward” profitability with new partnerships.
“At the end of the day, could Patch have been run better? We don’t know,” he said. “We were doing this while we navigated turning around the rest of the company. Patch was one of the big bets that we made, among others, and I still believe local will be a big opportunity whether it is Patch or someone else.”
Read full article at: consumerist.com/2013/12/16/despite-high-hopes-for-patch-aol-is-now-winding-down-the-hyperlocal-news-site/
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Patch Hit With Sweeping Layoffs As New Owner Hale Global Restructures
Posted Jan 29, 2014 by Matt Burns
techcrunch.com/2014/01/29/patch-hit-with-sweeping-layoffs-as-new-owner-hale-global-restructures/
The ax came down at Patch today. TechCrunch has confirmed that a number of Patch employees were let go this morning with another round of layoffs happening later today. We’re hearing hundreds were laid off, focused mainly around editorial staffing. Employees are being told to pack their virtual desks and clear the premises today.
This is the second major round of layoffs in six months — 400 Patch employees were let go last August.
The effected employees will receive their yearly Aol bonuses, a payout for accrued vacation time and two months’ severance. By taking the severance package, the employees are agreeing not to sue Aol.
“This is sad but didn’t really come as a surprise to many if not all of us,” one fired Patch employee told TechCrunch today. “Everyone gave it their best shot, but in the end no one could make the numbers add up. They treated us well, even as we headed out the door, so personally I have no complaints.”
As Jim Romenesko reported this morning, Patch is being restructured in connection with the creation of the joint venture with Hale Global. Some employees will be kept on and fill unspecified roles at Hale Global.
Aol sold a majority stake in its hyperlocal news outlet to Hale Global on January 15th. Aol retained a minority stake. At the time, Aol stated that they were spinning out the brand.
Patch had long been a sore spot on Aol’s balance sheet. The outlet failed to become profitable after Aol acquired it in 2009. Patch is estimated to have cost Aol between $200 million and $300 million to run.
In 2012 Aol CEO Tim Armstrong made a commitment to turn Patch around. In 2013, sites were consolidated or closed and staffing was cut. Still, nothing seemed to help. Despite the belt tightening, Patch remained a monstrosity of a network, spanning over 900 local blogs.
These layoffs do not come as much of a surprise. Patch was burning through money and Hale Global wouldn’t have purchased it without a plan to turn it around. Laying off hundreds of employees is a quick way to shore up the balance sheet.
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From:
www.businesswire.com/news/home/20140115006284/en/AOL-Partner-Hale-Global-Patch#.UvGIT5tVsVU
AOL to Partner with Hale Global on Patch
-- Companies Create Joint Venture to Pursue $152 Billion* Local Media Market --
January 15, 2014 04:01 PM Eastern Standard Time
NEW YORK--(BUSINESS WIRE)--AOL Inc. (NYSE: AOL) and Hale Global announced today the creation of a joint venture to run Patch, the premier platform for local news and information in the United States that serves more than 16 million people monthly** with a network of more than 900 sites. Under the terms of the agreement, AOL will contribute Patch into a new limited liability company, which will be operated and majority owned by Hale Global.
“Hale Global has a strong track record of operational excellence and platform experience, and we are looking forward to working closely with them on Patch”
Hale Global brings substantial experience in the areas of online media, local marketing, mobile, retail, and advertising and has an impressive track record for re-defining company visions and creating long-term growth from the companies they operate.
AOL and Hale Global believe residents of all communities should be empowered through technology to stay connected and informed. The companies are committed to re-launching Patch as an efficient platform that allows citizens and businesses to create and share locally-themed news and content -- not just with those in their own communities but to the wider world.
Among the concepts planned for Patch moving forward:
Technology solutions to make community participation seamless
Mobile-first experience with social integration
National, regional, and local advertising self-service tools
Geo-targeted advertising products
“We are committed to bringing users, local businesses, writers and advertisers together into a Patch experience full of innovation and growth,” said Charles Hale, CEO of Hale Global. “Along with AOL, we are committed to taking the necessary steps to ensure Patch remains a vibrant part of the community.”
“We are impressed by the commitments from Patch and AOL to serve communities and advertisers and look forward to working together to achieve our shared long-term vision.”
“Patch is an important source of information for communities, and the joint venture we created has a unified mission to provide local platforms and hyper-local content,” said Tim Armstrong, Chairman and CEO of AOL. “AOL has established leading positions in attractive scaled opportunities including video, brands, advertising and subscriptions by making bold bets and strategically investing in these high-growth opportunities -- and local will be a growth space during the next decade of the Internet.”
“Hale Global has a strong track record of operational excellence and platform experience, and we are looking forward to working closely with them on Patch,” Armstrong said. AOL will retain a minority interest in Patch.
The companies anticipate closing the joint venture early in the first quarter of 2014, subject to customary closing conditions. Financial terms of the transaction were not disclosed.
* BIA/Kelsey’s US Local Media Annual Forecast, November 2013
** ComScore Multiplatform, November 2013
About Hale Global
Hale Global is an investment holding company with a 13-year track record as a buyer and partner of choice for growth-technology special situations, including underperforming divestitures from corporate parents. The firm brings extensive in-house software and mobile development teams, turnaround skills predicated upon product innovation, and a deep operational bench. More information about Hale Global can be found at www.haleglobal.com.
About AOL
AOL Inc. (NYSE: AOL) is a brand company, committed to continuously innovating, growing, and investing in brands and experiences that inform, entertain, and connect the world. The home of a world-class collection of premium brands, AOL creates original content that engages audiences on a local and global scale. We help marketers connect with these audiences through effective and engaging digital advertising solutions.
Forward Looking Statements
This press release may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding business strategies, market potential, future financial and operational performance and other matters. Words such as “anticipates,” “estimates,” “expects,” “projects,” “forecasts,” “intends,” “plans,” “will,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify forward-looking statements. These forward-looking statements are based on management’s current expectations and beliefs about future events. As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances. Except as required by law, we are under no obligation to, and expressly disclaim any obligation to, update or alter any forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise.
Various factors could adversely affect our operations, business or financial results in the future and cause our actual results to differ materially from those contained in the forward-looking statements, including those factors discussed in detail in the “Risk Factors” sections contained in our Annual Report on Form 10-K for the year ended December 31, 2012 (the “Annual Report”) and in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 (the “Quarterly Report”), filed with the Securities and Exchange Commission. In addition, we operate a media and technology company in a highly competitive, rapidly changing and consumer- and technology-driven industry. This industry is affected by government regulation, economic, strategic, political and social conditions, consumer response to new and existing products and services, technological developments and, particularly in view of new technologies, the continued ability to protect intellectual property rights. Our actual results could differ materially from management’s expectations because of changes in such factors. Achieving our business and financial objectives, including improved financial results and maintenance of a strong balance sheet and liquidity position, could be adversely affected by the factors discussed or referenced under the “Risk Factors” sections contained in the Annual Report and Quarterly Report as well as, among other things:
1) changes in our plans, strategies and intentions;
2) stock price volatility;
3) future borrowing and restrictive covenants under the new revolving credit facility;
4) the impact of significant acquisitions, dispositions and other similar transactions;
5) our ability to attract and retain key employees;
6) any negative unintended consequences of cost reductions, restructuring actions or similar efforts, including with respect to any associated savings, charges or other amounts;
7) market adoption of new products and services;
8) our ability to attract and retain unique visitors to our properties;
9) asset impairments; and 10) the impact of “cyber espionage.”
Contacts
AOL Communications
Peter Land
Senior Vice President, Corporate Communications
212-206-5009
peter.land@teamaol.com
or
AOL Investor Relations
Eoin Ryan
Senior Vice President, Investor Relations
212-206-5025
eoin.ryan@teamaol.com
or
Hale Global
212-840-3900
media@haleglobal.com