AOL on Friday moved to cut losses at Patch, its struggling local news service, eliminating as many as 500 positions and closing or consolidating many of its sites across the country.
The cuts were an effort to reach profitability in a division that has failed to gain traction with consumers and has suffered huge losses financially. Patch’s troubles have been a source of frustration for AOL’s chief executive, Tim Armstrong, who helped found the service in 2007 when he was an executive at Google. Shortly after arriving at AOL in 2009, Armstrong had the company acquire Patch.
Patch will be leaving Washington state as part of the larger shake-up, the GeekWire tech news site reported Friday. Half of the staff members were laid off Friday, while the rest were told their jobs will end on Oct. 15.
Locally, the news service ran Bellevue, Woodinville, Redmond, Edmonds and Kirkland. But Patch never expanded into Seattle proper, GeekWire reported, where independent online news sites like MyBallard, PhinneyWood and The West Seattle Blog were already established.
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Patch’s idea is to provide an online network of local news sites, filling the gap in coverage left by newspapers that have either closed or greatly scaled back their investment in reporting in response to declines in advertising revenue.
The company said it had analyzed the performance of the approximately 900 Patch sites and identified about 60 percent as high-performing ones that should remain intact. AOL said it would look for partners to operate another 20 percent of the sites that are considered viable, and it would close or consolidate the rest. At its current staffing, Patch has more than 1,000 employees.
“Patch’s strategy will be to focus resources against core sites and partner in sites that need additional resources,’’ AOL said. “Additionally, there are sites that we will be consolidating or closing.”
Some investors, skeptical that Patch can succeed, have urged AOL to dump the service altogether. The company has told analysts that it expects Patch to be profitable by the fourth quarter of this year.
Armstrong has said he is confident in Patch’s potential. The company says the service has 3.5 million newsletter subscribers and 4.7 million registered users, increases of 138 percent and 181 percent in a year-over-year comparison. Between April and June, Patch had a 10 percent increase in traffic compared with last year, it said.
Patch’s troubles were the backdrop for an embarrassing episode for Armstrong last week. During a conference call with Patch employees, he became angry with an executive who was videotaping the proceedings and fired him on the spot, as employees listened. He apologized Tuesday for the manner of the firing.