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April 02 2011

19:02

Patch president outlines community strategy

The afternoon keynote at the ISOJ was by Warren Webster, president of Patch Media.

Depending on who you listen to, Patch is or isn’t journalism. But it is hiring journalists and has a presence in 800 US towns. It has 50% penetration in these markets and is growing in monthly visits by more than 40%.

The percentage of traffic from AOL is fairly small compared to other traffic, said Webster. Rather people are finding Patch sites through Facebook.

The Patch president likened Facebook to having a newspaper box on the street corner.

Talking about the future of journalism, Webster compared it to being in the head car of a fast speeding train, but not knowing where it’s heading.

He located Patch within what people are interested in, arguing that people are interested in what is within 10 miles or 10,000 miles, rather in within 100 miles.

“Patch wants to sit squarely in that 10 mile space,” said Webster.

He argued that Patch is journalism. ”We were the largest hirer of journalists in 2010. And that is something I am really proud of,” he said.

In terms of salary, Webster said it pays local editors more or the same that they would earn at a local weekly, with benefits.

Patch has one full-time employee per site, with, on average, 12 freelancers contributing to it.

He talked about the sites as platforms for neighbourhoods, bringing together disparate and disorganised local information together.

The Patch sites aim to bring together local and regional news, a local journalist, local events, local deals free business listings and community engagement.

Webster said that part of Patch’s appeal as a community platform is that it can be personal and local, citing a story about a lost dog who was later found by its owner.

Patch worked to weave itself into the local community, for example, by having its staff volunteer for five days a year.

Webster said Patch is keen to work with journalism schools and has a program called Patch University to foster connections.

 

March 10 2011

15:00

The newsonomics of AOL/Patch buying Outside.in

Editor’s Note: Each week, Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of news for the Lab.

There are two ways to be local, we’ve learned.

You can create local news, as newspapers, TV, and some radio stations — and more recently, tens of thousands of bloggers — have done. Or you can aggregate local, sorting through what those newspapers, TV and radio stations, and bloggers have created, picking up what you want, lifting a headline and quick summary and providing a link.

Over the years, the aggregators have often laughed — not publicly, of course — at those silly people who sink millions into creating local news, or content of any kind, while creators have joked — sometimes publicly — that some day those aggregators will have to turn out the lights, when all the content creators have gone bankrupt and out of business. Creation is hugely expensive, when all you have to do is build a better algorithm, scoop up what’s already there, organize it better than someone else, and sell advertising against it. That’s why the first decade of this century has been largely the decade of the aggregators, with the Googles, Yahoos, MSNs and AOLs, among the leaders in aggregation — and revenue.

So as much as AOL CEO Tim Armstrong talks about sparking a content revolution and creating lots of original content, in the background, he also needs to up his aggregation game, using more and more of other people’s content. That’s how I read the recent announcement that AOL’s Patch is buying Outside.in, a company that uses technology to roundup local content, dividing it into the categories of local news and local blogs — and which has partnered with newspaper companies in its four-year history. (Sadly, the memorable url construction, owing to an Indian .in domain, will probably fade into history.) It’s a small play, but one that may have bigger impact on the emergence of hyperlocal news — and local advertising/marketing dollars — in the years ahead. Let’s look at the newsonomics of the Outside.in deal, and what it tells us about the future of Patch itself and AOL’s play to get bigger audiences faster.

The deal — for a purchase price of less than $10 million — is small when compared to the investment ($14.4 million) put into Outside.in by some high-profile investors (Union Square Ventures, Marc Andreessen, John Borthwick, Esther Dyson, and CNN) and when compared to AOL’s $315 Huffington Post buy. It’s tiny, also, when compared to AOL’s spending of $606 million for 14 acquisitions since the beginning of 2010 — a number, of course, that itself pales against Google’s 48 purchases for $1.8 billion over roughly the same period.

Yet it parallels the HuffPo buy in a major way: It’s an attempt by AOL to get bigger faster. Look at AOL’s financials and it’s clear Armstrong is in a race against time. As one savvy newspaper veteran pointed out to me last week, AOL looks, ironically, a lot like a newspaper company. It has a legacy circulation product, in slow, but unmistakeable decline — its AOL-brand Internet access service — and a digital ad business (in turnaround mode) that isn’t growing fast enough to turn the company sustainably profitable in the future. So The Huffington Post not only pasted the face of Arianna atop the site, in hopes her followers will follow, but acts as the wished-for rocket fuel for overall company traffic growth over the next couple of years, especially as the election season, with its political interest, dawns once again.

Patch is part of that strategy for audience growth, drawing into AOL customers through the local pipeline.

The Outside.in deal aims to do a simple thing to support that growth: create more page views around local content, at a lower cost to AOL. Or putting it even more simply: bulking up Patch, on the cheap.

And isn’t that what critics of fast-growing Patch — more than 800 served up across the country, the fastest-growing news startup and hirer of journalists in the last several years — have said since Armstrong and Patch President Warren Webster announced its hypergrowth plan last summer. For all of you who have said, “I don’t get the business model, they’re paying too much for content,” Armstrong and Webster apparently agree with you.

Patch still needs to make its one editor/reporter per Patch pencil out, but it can do something about the costs of lassoing other content. Peruse the Patches around the country — mainly on the coasts, but with a growing representation in the Upper Midwest — and you see lots of vitality and lots of variable quality. At the top sites, you’ll find the site updated with posts and tweets every few hours, and that owes itself both to the hard-working Patch editors (10-plus hour days are still not uncommon) and their ability to pull in good stringers. The budget for those stringers actually varies by the month, as Patch balances budgets and getting its allocations right. Take a bigger Patch site — serving a city of 80,000, for instance — and it may get more than $2,500 a month in freelance budget, while smaller ones serving communities of 20,000 may only get $1,200.

What Outside.in offers Patch is a new tool to manage how much local content it offers through aggregation — rounding up news from other local sources, including local dailies and weeklies and blogs, and how much it decides to pay for directly. Add Outside.in to Patch pages and you may get the sense of a fuller news report, Patch+. Sure the plus requires readers to link off the site, but that’s the nature of the aggregation game. You get more readers to come to because you’ve created one of the largest centers of local content. If you do it right, you can be ahead of the game — and trim costs.

Let’s look at it on a pure cost basis. If Patch gets 1,000 sites up and going, which should happen this year, and it can trim what it spends on stringers by an average of $500 per site per month, that’s $6000 a year in savings per site. For the Patch network in general, that’s $6 million a year. With Outside.in costing no more than one and a half times that number, you’ve paid for the acquisition in less than two years. (Of course, there are also ongoing operating costs as Outside.in CEO and able web serial entrepreneur Mark Josephson and some other team members join Patch.)

The tweaking, of course, is both about the algorithm — tour Santa Cruz Outside.in today, and the top five news stories are from the local Patch!; where’s the local daily, the Sentinel? — and in the content model. What’s the mix of paid, fresh voices and local aggregation that pulls in, and retains, audience?

That question is, of course, what leading local newspaper sites have been trying to figure out as well. A number of newspaper partners of Outside.in itself have tried, without significant commercial success, to figure out the formula. Other sites like SeattlePI.com have used aggregation (SeattleTweets) and innovators from the Miami Herald to the Journal Register papers have signed up local bloggers, in distribution and ad-revenue-sharing programs. All of these are works-in-progress at getting the local original content creation/aggregation model right.

Patch could get it right, or righter, and become a more formidable challenger to local newspaper sites — especially as they go to paywalls of various kinds. (Although that also reopens the question of how findable and linkable their own local content is for the aggregating algorithms of Outside.in and others.) If it does get it righter, it could also become a more likely potential partner for media companies looking to cut their own local costs and reach audience. It’s all in getting that cost of content unit/ad yield per unit of content right, and no one’s yet minted the winning formula.

We can see the dilemma in one current market. Journal Register CEO John Paton (who talks about competing with Patch, here) has been working with Outside.in, to supply aggregated content for the planned fyi.Philadelphia site. He put that relationship on hold this week, and delayed the product launch, as he conjures the question: Is the new Patch/Outside.in a friend, a foe, or some in-between still to be figured out?

September 16 2010

17:30

The still-evolving Newsonomics of digital transition

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

It seems like a simple enough question. If newspaper companies could make the switch to digital publishing, how much would they save in costs?

Newspapers have been Big Iron companies, operating on a industrial manufacturing cost basis, as the information revolution has developed all around then. They’ve participated, triumphed here and there, yet seen their business model effectively cut in half, as first the classified business cratered and then other ad lines shrank.

Surely, as newspaper companies go digital-first, multi-platform and tablet-ready, there’s a financial path from here to there. Surely we can see how the old costs of physical production, printing and truck-based distribution can be winnowed, replaced by hyper-efficient digital creation and distribution.

I’ve been plumbing around in those numbers for a couple of weeks, and I can report back that the print-to-digital transition is at best a work in progress. Sometimes it seems more like an exercise in the pseudoscience of numerology. There are all kinds of intriguing numbers — but they just don’t add up yet.

The numbers we know, though, tell stories, and offer pointers.

Take this one: 4.1 percent. That’s what Warren Webster, president of AOL’s newly expanding Patch, recently told me it costs his company to match the content production of a “like-sized newspaper.” Meaning that Patch can produce the same volume of content (quality, pro and con, in the eye of the beholder) for 1/25 the cost of the old Big Iron newspaper company, given its centralized technology and finance and zero investment in presses and local office space. (Staffers work out of their homes.)

That’s an astounding number, which even if tripled, gives a legacy publisher or editor pause.

Yet the second sentiment coming out of that publisher’s or editor’s mouth is this: Tell me exactly how is Patch going to make enough just to be profitable, even if it only pays one very full-time reporter, plus freelance, per community.

For Dave Hunke, publisher of USA Today, which has just announced a major restructuring to get itself “ready for the next quarter-century,” such cost questions are very much on his mind. Yet asked how much cost could be cut out of the legacy enterprise if it went wholly digital, he pauses, laughs and says, “That’s honestly one of the few questions we haven’t looked at. You could have a reasonable number if you had a business model around the digital business.”

Hunke’s point is a big one. You can have a business model that supports a wholly digital news enterprise — it just won’t be a very big one. Take SeattlePI.com, supporting about 20 editorial staff and flirting with profitability. For Hunke, the question is how you keep a big news staff and a big news footprint as you transition. That’s the still-looming question for metro newspapers, who see the many startups forming around, under, and near them. And, at this point in the digital evolution, there’s simply nowhere near the money necessary to pay for big newsrooms.

Still, the question of digital transition economics is one that’s on many minds.

If you could flip that print to digital switch, what might it mean in numbers?

Start with 60 percent. That’s the rough percentage of costs that might come out of an enterprise, as print production, printing, circulation and distribution expenses, along with those jobs, were eliminated. The 40 percent or so remaining? Figure about 20 percent of costs are newsroom, and 10-15 percent are ad sales. Add in a reduced (from print heyday) number of finance, HR, marketing and management jobs. As one publisher told me: “There are still way too many managers around, managing lots fewer people and lots less money.”

That 40 percent or so number gives a notion, though, of where this is all headed, though it’s only a marker. Hunke announced a 9-percent staff reduction with the restructuring, and, of course, everyone wanted to know where those cuts were coming from — production, circulation, advertising or elsewhere. He says he couldn’t say because he doesn’t yet know.

“Nothing’s a clean cut,” he says. He makes the point — one familiar to many publishers — that he’s leading a digital transition, but one that includes maintaining (and maybe growing) a print product along the way. His multi-platform, segmented audience approach means that job descriptions themselves are in flux. That, of course, makes budgeting even more difficult in the transition.

The notion of continued care and feeding of the print product — Hunke, correctly I believe, sees it as a niche product for a certain group of readers — is key. Remember that daily newspapers still depend on print for 85-percent-plus of their revenue. My sense is that the tablet will accelerate a print-to-digital transition — especially for baby-boomer readers — and that hastening will favor newspaper companies that manage products, costs, and revenues smartly.

There’s no template, though, and no formulae that anyone can share. The transition road is too dark and bumpy at this point, without map or GPS.

August 17 2010

09:46

paidContent: AOL hyperlocal network Patch plans 400 new sites

paidContent reports today that AOL’s hyperlocal venture Patch could become the biggest new employer of full-time journalists in the US, with plans to add hundreds more sites by the end of the year.

According to the media site, Patch’s president Warren Webster told them the company plans to add 400 new hyperlocal sites to its network of 100 so far, doubling its current advertised state coverage.

Webster says that Patch is selecting towns to expand to based in part on a 59-variable algorithm that takes into account factors like the average household income of a town, how often citizens vote, and how the local public high school ranks; the company is then talking to local residents to ensure that targeted areas have other less quantifiable characteristics like a “vibrant business community” and “walkable Main Street”. Patch hires one professional reporter to cover each community; each “cluster” of sites also has an ad manager who is the “feet in the street” selling ads.

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