Sunday, April 15, 2012

Patch Watch

There is no soap opera in the business world quite as compelling these days as the economic difficulties of AOL, and in particular its vast investment in the hyper-local news sites known as Patch. There are 800 or so of them across the country, including our very own Sierra Madre Patch. And as news lite and purposefully sunny as these sites might be, they also consume a lot of AOL's cash, about $160 million of their dwindling reserves in 2011 alone. Something that seems to fascinate the business press. Why would any company spend so much to sustain 800 marginally read websites that have remained so stubbornly unprofitable?

In fairness to our local Patch brethren, it has to be said that they did perform a valuable service during the recent City Council elections here. By providing a platform for the candidates to explain their positions on the key issues facing Sierra Madre, and in their own words, they did help people to understand where those running were coming from. And a couple of these "blog posts" did connect. The best example being John Capoccia's posts in opposition to the two UUT Measures, a perspective that he introduced to the campaign first. A message that not only led to the most significant power shift on the Sierra Madre Council since 2006, it also helped contribute to the overwhelming defeat of the two Measures themselves.

However, Patch's reporting of our election was hardly perfect, with their remaining coverage focusing on little more than a series of three on-line polls accompanied by acerbic and anonymous reader comments. This apparently was chosen as a way to involve their audience in lieu of offering any actual editorial exploration of the issues or personalities involved in the race. It was almost as if they were attempting to maintain a sanitary distance from the ruck and roil of actual politics, done out of a concern over possibly offending their core audience. Readers who don't know very much and find politics to be confusing, intimidating, and therefore off-putting. People who can't handle anything in the way of actual ideas.

But I digress. Lately the world of AOL Patch has been roiled by a number of contentious things, and I thought we would point a few of them out to you. AOL's current CEO, Tim Armstrong, is today facing a significant challenge from an activist hedge fund calling itself Starboard Value. And one of the key issues involved is the continued existence of AOL's major loss leader, Patch. Armstrong's continued support of these 800 cookie cutter sites being one of the major reasons why Starboard Value passionately desires to boot him out of his corner office.

The consistent impression in the business media has been that should Armstrong lose in his struggle with investors and stockholders to survive there, Patch would quickly join him as being a thing of the past.

So here are 3 articles from various places around the internet that highlight all the excitement surrounding the woe at AOL, and Patch.

Top AOL Patch Editor Jumps Ship (TR Online.com - click here): In business, you will find the captain never goes down with the ship. Nor do the first mates, deck crew or engine room workers. In fact, in business, it's quite the opposite. Nobody wants their career tied to a titanic of a disaster, because it hurts you down the line when applying for a new job or seeking venture capital funding for your next start up. It's usually the passengers who go down with the sinking ships in business, and a good sign of a sinking ship is counting how many officers and crew are jumping off the boat and how fast they are following each other.

The AOL Patch exodus continued this week as Brian Farnham, employee #4 and Patch Chief Editor, became the latest in a long line of Patch execs jumping from the prow of the sinking AOL media initiative. Farnham's departure comes in the midst of a potential AOL board of directors take over attempt by a major shareholder, Starboard Value, who said recently that the company's sale of patents was not enough to stave off their inevitable grab for power. Starboard has recently expressed frustration over the company's roughly $160 million loss in Patch in 2011.

Patch has been met with wide criticism in the media, both local and national, because of its bland blend of free bloggers and freelance writers featuring a mediocre brand of hyperlocal news blogging.

You've Got Patents, AOL's Desperate Move (The New Yorker - click here): This morning AOL announced that it would sell or license about eleven hundred patents to Microsoft, in return for a billion dollars and change. Much of that money, AOL proclaims, will be passed to shareholders. The move is roughly akin to Warren Sapp selling off his massive collection of Air Jordans, or Jean Dujardin auctioning off his furniture in "The Artist." Times are tough for AOL, and cranky collectors are banging at the door.

As Ken Auletta explained last year in a terrific profile of Tim Armstrong, the CEO of AOL, the company has long been buoyed by the incredible fact that there are still lots of people who send in monthly checks, unaware that they no longer need AOL to connect to the Internet. Gradually, these people are dying off, or, with the help of their grandkids, figuring things out. AOL has known for a long time that it needs to find new revenue streams, but has done so slowly. Activist shareholders have started complaining, and now, it seems, Armstrong has bought them off.

AOL Patent Deal Does Not Appease Starboard (New York Times/Deal Book - click here): AOL will need more than a billion-dollar patent sale to quell the ire of one of its largest stockholders.

Starboard Value, a money manager that owns a 5.3 stake in AOL's stock, sent a letter to the Internet company's board on Tuesday, to congratulate the directors on the patent sale - and to warn them of a coming proxy fight.

In the letter, Starboard described AOL's nearly $1.1 billion sale of 800 patents to Microsoft as a "big first step towards realizing the full value of AOL," but said the transaction did little to address AOL's real problems, like its ailing display business and its poor track record with acquisitions and investments.

In its long list of concerns, Starboard reserved special venom for Patch, the local news service AOL bought in 2009. Although the acquisition itself was small (about $7 million), AOL has since sunk millions into the project. According to Starboard estimates, the company is losing about $150 million per year on Patch. "We remain concerned that shareholder capital will continue to be used for poorly conceived acquisitions and investments into money-losing initiatives like Patch and other display properties," Starboard said in the letter.

Things just aren't getting any easier for AOL Patch, it seems.

http://sierramadretattler.blogspot.com

46 comments:

  1. But if Patch is gone, who will link to Coburn's hit pieces?

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    Replies
    1. Good point. Judging by the Measure 12-1 and 12-2 results, Patch must have driven dozen of readers to Bill's site.

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    2. John and Diane ShearApril 15, 2012 at 8:51 AM

      We got a really nice postcard from newly elected Councilman,Mr. John Capoccia. John thanked us for our support of his campaign and for our support of NO on UUT.
      John Capoccia was a huge factor in getting the word out about this UUT tax. So was Mr. John Crawford and Tattler posters.
      The huge turnout of voters and the huge landslide the NO got, proves that the people will stand up to city hall, if they believe they are being lied to. It proves we the people, still have control if we choose to exercise it.

      The local media, with the exception of Mr. John Crawford's Tattler and to some extent the Pasadena Star News, were very unfair and very biased. The people of Sierra Madre caught on and rejected this propaganda.

      The Chris Koerber staff and MaryAnn MacGillivray staff also played a big part in defeating this unfair tax.

      Thank you Sierra Madre voters for rejecting this. You did the right thing!

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    3. I too got a hand written postcard from John ...Capoccia.
      John Capoccia is a class act.

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    4. I also got a card and appreciated so much that he took the time to thanks us all for making a difference.

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  2. This is the part that drives me crazy:
    "there are still lots of people who send in monthly checks, unaware that they no longer need AOL to connect to the Internet"
    Isn't that illegal?
    Won't AOL have a large class action lawsuit over that?
    They are duping their customers, have been for many years, and why isn't there a consequence.

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    Replies
    1. What is even sadder is that AOL is taking all of that money from unaware seniors and losing it all on their bad Patch investment. What a mess.

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    2. I gotta think that every little ole senior in Sierra Madre who sends in a check to AOL also voted to elect Joe Mosca.

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    3. If I don't send AOL a check I won't be able to get emailed pictures of my grandchildren in Iowa...

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    4. 9:45, oh yeah. Sure thing, that.

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    5. How do I get my internet for free?

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    6. I figured out my neighbor's wifi password.

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  3. Patch has always reminded me of someone who says "I am cool."

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  4. Patch is local news media for a politically illiterate age.

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  5. "Enslavement by illusion is comfortable, it's the liberation by truth that people fear".
    A lot of people in Sierra Madre would rather believe their illusions about what certain politicians, past and present tell them about Sierra Madre and read the lies that Susan Henderson and Bill Coburn write about issues and even more tragic, about former Mayor MaryAnn MacGillivray. Vicious lies, that are proven to be untrue. Still these unscuptulous people contine to spread them, along with their pals in certain clubs in town and markets in the canyon.

    I've known MaryAnn MacGillivray and John Crawford well for the past 5 years.
    I'm here to tell you all that to these fine citizens of Sierra Madre, there is nothing stronger than the truth. Nothing.

    We are blessed to have these great people looking out for us.

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    Replies
    1. To not see MaryAnn MacGillivray for the powerful and intelligent leader that she is, requires an enormous amount of willful blindness. Or just lazy, lazy thinking.

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    2. I think it is a form of mental illness.

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    3. Wait'll they see her in action on the other side of the dais!

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  6. $160,000,000 in 2011 to keep Patch afloat? Wow.

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  7. Thank you John Crawford for providing the people of Sierra Madre and surrounding areas this wonderful blog.
    You don't make a quarter out of this. How amazing is that?
    You donate your valuable time, your valuable money and your incredible talent as a writer and jounalist, to us.
    How awesome is that?
    Pretty damn awesome! That's what!

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    Replies
    1. Crawford is an exceptional volunteer.

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    2. Crawford is a GREAT MAN. A GREAT MAN!

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  8. Correct me if I'm wrong, but isn't "Starboard" Values just another acronym for leftward values? Is it just another lefty front organization that is looking to have an idealogical mouthpiece ?

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  9. Crawford, you're as much a journalist as Rush Limbaugh is. "Objective and fair"... please, what a bunch of crap!

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    Replies
    1. Well reasoned argument there, 12:50, thanks for your thoughts.

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    2. Actually I'm a blogger. And answer this if you can. Just because someone is a democrat, are they obliged to support incompetent, corrupt or ridiculously expensive government?

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    3. Ad hominems and nitwittery. All most of them have.

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    4. 12:50, how Alinsky of you. You have no political argument left, so you start the ad hominem (personal) attacks.

      Must be getting warmed up for attacking Koerber & Capoccia, huh?

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  10. The thing I like most about this blog is that even on a sunny day I can come over here and shade myself under one of Crawford's dark clouds.

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    Replies
    1. It certainly is a cure for "too much sunshine syndrome," 1:25.

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    2. Right 1:25, accuracy is always such a drag.
      Kinda harshes the mellow of the topsy turvey fantasy world where Joe Mosca has integrity, MacGillivrey is a Crusader of the worst sort, Karma Bell is an upstanding citizen of great moral certitude, and Zimmerman is a crook.
      Reality must be jarring to say the least.

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    3. They're in a kind of a panic. They couldn't lie their way to victory this time. Without that they don't have anything left.

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    4. I think 1:25 is a NOTE. (NOt Taxed Enough)

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    5. If 1:25 isn't 12:50 I'm Saul Alinsky

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  11. Good Heavens, the thread has devolved into an attack on Crawford?
    And I can just imagine the posts that are coming in that he has to delete.
    Looks like the losers are rolling in bitter.

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    Replies
    1. Looks like the 800 Patch editors have spread the word that Crawford needs to be taken down...

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  12. The trolls are feeling the heat of the sun today?
    I think I'll head down to "Transit Village" or the ruins of that fiasco and snap some photos.
    When Bart Doyle is finally finished, we'll give him a "tribute". LOL

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    Replies
    1. They don't come out from under their rocks often, but when they do it's nothing but complaints.

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  13. Back to Patch for a moment, why would anyone back the idea that "local" can come out of a boardroom in New York City?
    Maybe if they had just been more honest - as in AOL New York City has an editor in your town.

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    Replies
    1. Hyper Local or Hyped Up Local?

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  14. THE CITY RESIDENTS SLASHED THE UUT Bill 12-1 & 12-2

    Whats required to put the following inititives on the 2012 Ballot...
    The residents will get to vote yes or no
    The city does not get to cram it down the residents throat!

    1. Remove the 37% Water hike
    2. Hire a new city attorney, is Kurt Zimmerman available?
    3. Hire a new city manager,

    AWAITING A REPLY....

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  15. Sierra Madre Spend Watch
    City of Sierra Madre Spending...
    How much more money is available until the city goes broke?

    2012:
    03/27 $517,415
    03/13 $466,760
    02/28 $778,630
    02/14 $964,113
    01/24 $684,590
    01/10 $1,252,734

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  16. I find it telling that one Billion dollars was not enough to help out. One Billion.

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    Replies
    1. If the stockholders and those other nuisances would butt out it would keep Patch afloat for another 6 or so years. After that they'd have to start selling the office furniture.

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