“Hale” Mary for Aol’s Patch

Filed under: Around Town,News |

“Hale Global” not Hail Mary will try to save the Patch. Most media are reporting that Hale Global a private firm will have control of the Patch and that AOL the parent company for the Patch will contribute the assets of the Patch in total to a new LLC. Hale Global will have a majority interest, with AOL having a minority interest. Because Hale Gobal is private they do not have to disclose the deal’s parameters. However AOL a public company will have to file that information in their 10Q reporting about this transaction.

patchlgoToday Forbes, the Wall Street Journal and Adage are reporting that Hale Global is a turn around specialist. They have turned around 2 digital companies. Both were in the software business not the media business. That does not bode well for the newly formed company, thus why it is time for the “Hale” Mary.

Patch has been a personal addiction of Mr. Armstrong AOL’s CEO, and also something of an albatross. He helped create the network while at Google and, when arriving at AOL, was behind the decision to buy the Patch in 2009. But Patch expanded too quickly and became unwieldy.

Over the years, Patch lost $200 million to $300 million and was the subject of a proxy fight as investors lost confidence. Mr. Armstrong had to promise to pare back his vision, and last year he laid off hundreds of staff members. No details on staffing plans were provided with the announcement of the deal with Hale.

Adage.com stated “The announcement marks the last significant chapter in AOL’s Patch saga, an embarrassing slog defined by the steady stream of bad news that leaked from its corridors. The tension cast a shadow over AOL, drawing national attention when Mr. Armstrong fired Patch’s creative director at the start of a Patch-wide conference call last year.

The terms of the deal were not disclosed. Which is fitting because the offloading of Patch, not whether money changed hands, is what mattered for AOL.” (http://adage.com/article/digital/aol-s-patch-partner-hale-global-decide-future/291123/)

All through it’s history “the Patch” has been a costly affair.  One of their own companies “TechCrunch.com” stated “Patch’s failure to thrive has cost AOL an estimated $300 million (though the company claims that figure is closer to $200 million). Armstrong’s reputation has also taken a blow, most notably when he impulsively fired Patch’s creative director Abel Lenz for taking a photo at a meeting, an “emotional response” that he later apologized for. Armstrong’s attachment to Patch also helped trigger a proxy fight in 2012, when hedge fund Starboard Value L.P ran for three seats on AOL’s board while questioning Patch’s viability.” (http://techcrunch.com/2013/12/16/aol-will-close-patch-after-its-long-struggle-for-profitability/) Although AOL does not break out numbers for the Patch $300+ Million has been spent on this Armstrong affair, with maybe $50-75 million in revenue.

David Carr of the NY TIMES reported on Dec 15th that “the Patch” was all but dead.  Here is some of what he stated in that article:

http://www.nytimes.com/2013/12/16/business/media/aol-chiefs-white-whale-finally-slips-his-grasp.html?pagewanted=all&_r=0

Carr stated ” At a conference in Manhattan last week, Mr. Armstrong suggested that Patch’s future could include forming partnerships with other companies, an acknowledgment that AOL could not continue to go it alone in what has been a futile attempt to guide Patch to profitability. He called it, somewhat hilariously, “an asset with optionality.” There may be a few options for Patch, but none come close to the original vision for the site.

The board of AOL, handpicked by Mr. Armstrong, authorized him to invest $50 million on the idea in 2010 and after that, it became a black hole for cash. By the end, it had cost an estimated $300 million. (AOL said the figure was more like $200 million.)”

At the end of his article Mr Carr stated “Mr. Armstrong came close to betting the company and his future on Patch, but in the end, his survival instincts and shareholder pressure compelled him to let the white whale swim away.

But he still cannot quite admit that it is over. In the phone call on Friday, Mr. Armstrong talked about impending partnerships and stressed that Patch was “moving toward” profitability. Patch, even in its death throes, is ever nascent, still rising, on its way to a future only its founder sees.”

Bottom line now for the Patch it is no longer AOL or Tim Armstrong’s problem. Certainly the investment firm will not spend the enormous amounts of cash AOL did; they want to make money. So is it a new beginning or a new end?

Side note while investigating for this piece I found an article that stated Hedge Fund Ironfire Capital out of Toronto Canada owns a large stake in Yahoo and has now taken a stake in AOL; Plus, others are purchasing options in AOL thus the investment community feels Yahoo could be looking to buy AOL.

*******************************************************************************************************************

Armstrong sent the following memo to AOL staffers, according to TechCrunch (which is owned by AOL):

AOLers,

AOL has a strong track record of improving, pivoting, and partnering – that’s what successful companies and start-ups do. AOL’s return to growth has been built by making smart investments and by calibrating our investments while moving through opportunities.

We pivoted our ads business to programmatic, we pivoted our content business to powerful brands, and we pivoted our video production to becoming a video platform.

Today we are pivoting another area of our business: local. The local digital space will reach $152B by 2017, driven by a $21B growth in local digital revenue over the next three years and we have invested in local with Patch. The goal for Patch has always been simple – to be a local platform for information and commerce in towns and to serve communities in a meaningful and human way.

After extensive discussions over the last several months with many companies interested in the local media business and local platform business, today we are announcing a joint venture partnership with Hale Global. Hale Global is a private company that has a successful track record of investing and growing technology assets, and we believe they are very well positioned to nurture and grow Patch. Hale has made investments in local commerce and platforms, and they have a strong team of leaders and technical expertise. Hale’s CEO, Charlie Hale, is a strong believer in the power of local, local platforms, and local storytelling. Bud Rosenthal and Charlie Hale will be detailing Patch’s go-forward plan and next steps with the Patch team today.

AOL has delivered on our commitment to our investors and put Patch in a position to be successful. We are retaining a meaningful minority interest in the joint venture, and we stand to benefit from Patch’s pivot to platform excellence.

While Patch pivots, it is important to remember that it serves millions of consumers throughout hundreds of towns in America and partners with some of the largest and smallest businesses that serve those communities. Hale will help Patch improve, and we will be partners with Hale in the next phase of the journey – TA

 

Facebook Comments must be signed into Facebook

http://www.e-zsewer.com/

You must be logged in to post a comment Login