Analysts React to AOL’s Huge Bet on Local News

Analysts were quick to weigh in yesterday on AOL’s plan to unveil hundreds of hyperlocal news sites this year, up from 30 today, per a memo seen by Business Insider. That ambitious goal is consistent with recent comments CEO Tim Armstrong made about a planned expansion of the local publishing division, called Patch.

Reaction to the news from local media analysts ranged from admiration to puzzlement. Several pointed out that, while significant, Patch’s vision for hyperlocal news is still largely nascent and untested. Below, a sample of reactions from three prominent blogging-heads.

Ken Doctor, an analyst with Outsell, was bemused about the characterization of local news as “white space”:

Local – not long ago the domain of newspaper, TV and radio behemoths so dominant that barriers to entry made competition seem unthinkable – is now open territory, a vacuum to be filled by a combination of youthful journalistic energy and state-of-the-art technology.

In hyperlocal, where others see too much cost and too little revenue, AOL believes that Patch can be a real business. Take a look at Patch, and you see lots of meat-and-potatoes coverage, on a par with community weeklies, though not much advertising.

Greg Sterling, of Sterling Market Intelligence, said the key to AOL’s success will be the quality of content, plain and simple:

Obviously this would mean lots of page views and a bona fide local ad network. The questions that arise, however, include:

– Can they generate sufficient quality to achieve sustained readership and “brand” status?
– What’s the ad model? It’s geotargeting for nationals and partnerships with local channels for SMBs
– Will they pick the right partners and have the right content mix to create a compelling product?
If it’s all about page views and “shelf space” (SEO) for AOL and not about quality the effort will certainly fail.

Peter Krasilovsky, of Kelsey Group, noted the advertising business at Patch is still gelatinous and unformed:

Patch.com President Warren Webster told us [in November] that Patch was just starting to sell advertising in the towns that it initially launched in. “We have a multi-prong revenue model, with fixed placement banners, classified ads and other products,” he said.

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