AOL Begins Massive Round of Layoffs at Patch, Shuttering of Sites
The network of community news sites is set to lay off about 500 staffers, as many as 350 today, according to a report by AllThingsD.
As earlier reported, as much as 40% of Patch's 900 sites may be shuttered, with 20% closing immediately and another 20% set to search for partners, according to multiple reports.
In a lengthy statement, AOL had this to say about the moves: "Patch, as previously announced, is taking steps to move to profitability. Patch's strategy will be to focus resources against core sites and partner in towns that need additional resources. Additionally, there are sites that we will be consolidating or closing."
"Patch has become an important brand across many towns in America," the company continued. "The Patch team across the country has served and will continue to serve communities with journalism and technology platforms. Unfortunately, with these changes we are announcing today, we will be reducing a substantial number of Patch positions. The people leaving Patch have played a significant role in making Patch an integral part of the communities it serves – and we thank them for their hard work and passion for Patch."
AOL has poured hundreds of millions into Patch, seeking to capture both national ad revenue across Patch's network and a slice of the $132 billion U.S. local advertising pie. However, Patch is not yet profitable.
It's a tough moment for the company, and professionally for AOL CEO Tim Armstrong. He founded Patch in 2007 as a personal venture, devoting $4.5 million to start the business. He eventually sold the unit for $7 million to AOL, which was then still part of Time Warner. As AOL's CEO, Mr. Armstrong recused himself from the deal and forfeited the $750,000 he made in profit. He also returned the $4.5 million he recouped from the sale in exchange for AOL shares after it split from Time Warner. "Patch is always something I've believed in," he said earlier this year.
The struggles with Patch have spiraled into a PR mess. During a meeting with staff last week, Mr. Armstrong paused to unceremoniously fire Patch creative director Abel Lenz for recording the proceedings with a camera phone. The audio of that call, and photos, were leaked to Jim Romenesko's media blog. Mr. Armstrong later apologized, calling it an "emotional response."
"I take full responsibility," said Mr. Armstrong on a conference call with Patch employees last week, asking them to blame him for Patch's failures and promising he would remain committed to the company's future success.
"If you guys think that AOL has not been committed to Patch, and won't stay committed to Patch, you're wrong," he said. "The company has spent hundreds of millions of dollars, the board of directors is committed, I'm committed."
By cutting staff and sites, AOL is holding on to the sites that are succeeding and those with potential, while removing the laggards. The result, it hopes, will leave Patch leaner, stronger and, eventually profitable.
"We have to get Patch into a place where it's going to be successful and it's going to be successful for a long time," said Mr. Armstrong. "There's a whole bunch of towns that are going to be successful but we need the whole enterprise to be successful."
AOL is is hoping Patch's rough days are behind it though. It deemed those that remain the "go forward team ."