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May 23, 2012 By Steven Greer
The new era of hyper-local news reporting from “blogs” has been underway for a couple of years now. AOL has Patch.com. DNAinfo.com is funded by Billionaire Joe Ricketts (of TD Bank fame), and the Examiner.com is funded by billionaire Philip Anschutz. Numerous traditional newspaper companies are also trying to get in on the game as viewership of local TV news is decreasing and newspapers are almost extinct. However, none of them have figured out how to make a profit yet.
The Wall Street Journal featured the problems that AOL has had with Patch.com. After acquiring the Huffington Post, Arianna Huffington was put in charge of Patch.com as well, and then promptly relieved of her duties. Each local news blog of Patch.com makes approximately $50,000 in revenue but costs anywhere from $150,000 to $200,000 to operate. Running a $100 Million loss, AOL announced that it will layoff 20 employees, or 2% of the staff.
To cut costs more, Patch.com is adopting the controversial business model of recruiting unpaid journalists and editors, as the Huffington Post does. The Huffington Post has been criticized for being nothing but a news farm aggregate that takes original stories from other sources and slightly rewords them to seem more like Huffington Post original stories.
The demand for local news from online sites is not the problem. Patch.com has grown from 30 local news sites to more than 850 within two years, with 10 Million unique viewers per month. Why the local and national advertisers have not adopted the new Internet method of news delivery, and still prefer local TV and printed papers, is unclear. Despite the potential of the Internet for content delivery, the old-school Madison Avenue advertising executives are not catching up.