Friday, August 27, 2010

Local news group Patch mimics web pioneer's model; similar model attempted in B2B, and it didn't end well

Last week AOL-owned Patch announced that it had launched its 100th local news site and said it would expand quickly to reach more than 500 neighborhoods by the end of the year.

"We believe Patch is a revolutionary and efficient approach to producing relevant, quality local journalism at scale, and we couldn't be more excited about expanding into hundreds of new communities across America this year," said Warren Webster, President, Patch Media.
Patch also bragged that it would be "the largest hirer of full-time journalists in the U.S. this year" -- an easy claim to make seeing that most news organizations continue to cut back its news staffs, not grow them.

For those intimately involved with the growth of Internet publishing, there is nothing terribly revolutionary about the Patch approach. I suppose we have now reached a point where a new generation of Internet publishers are entering the scene, and to them everything is new and revolutionary.

Patch's approach is simple enough: each new local news site gets a full time editor, local reps are hired and a regional manager keeps an eye on things. [At least that is the way I understand it based on the recruitment ads popping up on job boards.]  Many of the editors being hired are quite young and inexperienced but they will report into four regionally based editorial directors, who themselves will report into Patch's editor-in-chief Brian Farnham.

Patch's money comes from AOL, of course, who purchased the firm back in June of 2009 and promised to spend a significant amount of money to build out the network of local news sites.

But back to the concept.  The reason I don't consider Patch isn't revolutionary is simply that it has all been done before -- though I will admit that it was done in a different segment, at a different time, and, of course, with different players.

Substitute "B2B" for "local" and you get VerticalNet, a company that was well funded with investor money, went on a major hiring spree, made a lot of noise and then imploded. For many in the B2B media industry, VerticalNet is more a curse word than a name of a real company.

VerticalNet was a company of another era -- the late nineties -- and its approach was to hire editors from industry trade publications, launch an industry site, and then sell the ads with teams representing multiple sites.

Back then the money came from VCs, and the lure to join VerticalNet was the opportunity to get shares of the company and cash out at some point after an IPO. Everyone would be rich (some actually did cash out in time). Because of this VerticalNet attracted some pretty good talent -- experienced editors who knew their industries. The edit teams were certainly thin compared to their print counterparts, but since this was the early days of the web updating a site once or twice a day seemed like a miracle of technology.

The VerticalNet business model depended on sales reps quickly learning to sell these new sites, and for national advertisers to get excited about advertising on the network of industry sites. The ad staffs may have worked hard but the business model -- rapid expansion, IPO, repeat -- made little sense long term.  In 2000 the company reported that it revenue had grown to $112.5 million from $53.5 million the previous year. Unfortunately, the company also reported a loss of $311.3 million.

When VerticalNet finally went public, and its stock price soared to silly heights, the company became a poster child for "irrational exuberance".

Today, Patch's lure to media people is the down economy: come in and get a job, we're the only ones hiring. If the economy were booming, and media companies were hiring, Patch would be seen as the hire of last resort. But the economy is not booming, and media companies continue to downsize, so Patch is taking advantage. Besides, working for a local news site has to be far more attractive than an alternative such as Demand Media, right?

Looking at some of the Patch websites (I won't get too specific here) one sees a mix of veterans and recent grads. (One editor's picture looks like it is from high school -- it's not).

Many of the site biographies try really hard to show that the editor has the credentials to do the job. One rather troubling element of these biographies, though, is the sections on politics and religion, as if this sort of disclosure will give readers assurance that the editor is fully open about their biases. As someone who grew up in media management in California, with its strict employment regulations, this just seems like a bad approach. Credibility as an editor must be earned, not quickly gained through a spiffy bio.

But I'm not posting this story to really talk about the editorial strategy of Patch, I'll leave that for the content sites,

Like VerticalNet, Patch has its own ideas about how to generate revenue, and Patch management appears to be just as convinced they are on the right track as VerticalNet was. Time will tell, of course, and I am wise enough (I believe) to not judge business models too early on.

I like the concept creating independent local news site and building a network, such as those being created by Patch or Main Street Connect. But the reading habits of consumers may prove to be an obstacle.

Back in January I reported on the talk given by Hal Varian, Google's chief economist. Varian said that his data showed that news consumption on Google was a work day activity -- going up during the day, down during the evening, and way down over the weekend. "What that says to me is that reading the news online is a work time activity . . . Most people aren't paid to sit at a computer and read newspapers. They're snatching things throughout the day," Varian said.

This is where mobile media and tablets come in. Most news apps on smartphones are simple RSS readers that have failed to incorporate local merchant information, maps, shopping tools, and the like. Local news and local merchants seems to me to be a match made in heaven.

Additionally, the tablet best reproduces the leisure time experience of reading the (hyper) local paper. One can do it on the weekends without feeling out of touch (where as news generated by the major publishers feels immediate). Certainly one can use the browser on an iPad to access a Patch site, for instance, but there may be room for developers to create local news apps, as well. I hope we see some VC money invested in this area to provide an alternative approach to web-only news products. (Remember, you can't have content everywhere if you are either print-only, or web-only.)

Patch and the other local news ventures are not creating a revolution -- despite their PR -- but it they are filling a real need. VerticalNet, which was founded in 1995 and really did lead a revolution, grew fast and burnt out fast. Sadly, today B2B media companies are some of the most backward on the web, and almost nonexistent in mobile media.

The newspaper industry, in contrast, is firmly committed to web publishing, and many of the nation's leading papers are also leading efforts to experiment with mobile and tablets, as well. If these new local news businesses can find a way to succeed at being a pure play that would be a real revolution. Otherwise, they would be wise to look a diversifying their media offerings rather than depending on the web alone.