The Patch Layoffs Are Not Surprising

Today’s Patch layoffs are unfortunate, especially in the current media market. They are not, however, surprising. Patch wasn’t profitable, and despite AOL’s firm promises, never found a new path forward.

Disclosure: AOL, which owns TechCrunch and therefore signs my paychecks, retains a stake in Patch.

Today’s layoffs mark the second traunch of Patch’s slimming. Crash diet or not, Patch failed its key test: Profitability by the end of 2013. AOL was hellbent on stemming Patch’s losses by the end of the year, and as far as can be told externally, it failed, so Patch had to go one way or another.

Reporting indicates that AOL wasn’t too choosy about who picked up the money-losing property. Why does that mean layoffs are hardly surprising? Simply that you don’t buy a distressed asset in hopes of it continuing to lose money.

Whatever the value of Patch now, it had essentially zero in its prior form other than non-financial human capital. An asset that has negative cashflow is a liability, not something you buy and keep in its current form.

So Hale, the now majority owner of Patch, firing a chunk of the remaining staff isn’t much of a shock. Patch retains a certain revenue stream we can presume it wants to bank on, given that the network still holds an audience. But at its now prior size, that audience wasn’t enough to drive revenue sufficient to draw profits. And that’s the ball game. The old joke that the billion-dollar company that loses a dollar per year eventually dies is true.

It’s a shame that Patch is so ill. The ideal, idyll even, of building a network of local sites dedicated to local news and the goings and doings of small communities was, I think in moral terms, worth exploring. Was it worth a few hundred million dollars? AOL bet that it was. It appears now that the gist of Patch is past and the rift that it will leave is current.

Who will try hyperlocal next?

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