September 13, 2011

Patch by the numbers 2: Advertising

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By Anna Tarkov
When it comes to advertising, the four Patch sites I reviewed in August all relied heavily on national advertising, while three were also attracting a significant amount of local ads. Patch local business directories also figure in the revenue mix.

Last week we took a look at Patch’s content and audience engagement. Now it’s time to talk turkey, as the old expression goes. In other words, show us the money. After all, content and everything else will be for naught if Patch can’t financially sustain itself. Since Patch content is online only and is free to read for all visitors, revenue comes solely from advertising. Though, as we’ll see, that can take different forms.

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As with content, my approach was to take note of the ads that appeared on portions of four different Patch sites. A California site (Hermosa Beach; launched 3/8/2010), a New York site (Rye; launched 12/22/2009), Florida site (Brandon, launched 12/15/2010) and a Midwest site (Northbrook; launched 9/9/2010).  (Note: I reside in Northbrook.)

I defined “Local” as an advertiser actually in the town that the Patch site covers; “Metro” as an advertiser a nearby town or in the general metropolitan area. National advertisers are national companies. Patch includes house ads promoting advertising on Patch or Patch daily deals. (More on methodology at the end of this post.)

It’s important to note that this was a scan of only four Patch sites out of a network of 861. So draw your conclusions if you must, but do it carefully.

What does Patch offer advertisers?

At first glance, when looking at a Patch site page like this one, it might seem like display ads are the only thing on the menu for advertisers. After talking to Patch President Warren Webster, I discovered that Patch offers more.

Most of the other products have to do with the directory of local businesses, schools and other neighborhood spots that each Patch site has. With its obvious importance to the bottom line, the directory is prominently featured as one of the top level categories on each site (here’s an example).

Webster billed these directories as a vital resource for the community as well as to area businesses. He also stressed that they aren’t purchased from a third party, but hand-built. Webster said that every business or place listed has been visited in person by a Patch staffer and all information such as hours, parking, etc. has been verified. Photos of the business are also taken and in the end, it looks something like this.

Patch hopes to make money on these directories by having businesses claim the listings Patch has created for them. Claiming one’s listing doesn’t technically cost anything. But once a business claims its listing, Patch will pitch the idea of producing a video commercial to appear in the listing like this one, putting the listing on different areas of the site, adding a message from the owner, being added to the Patch directories of neighboring towns and very likely buying display advertising. For many of these local businesses, it will be their first foray into having a web presence and that’s just what Patch is banking on.

How is the sales operation faring?

As with traffic stats, Patch will not release numbers on how it is faring in selling their various ad products or how much they are charging for them. A leaked ad rate card appeared in July, but a Patch spokesperson would neither confirm nor deny its accuracy.

Webster predictably dismissed the disgruntled Patch salesperson who is quoted in the link above. “It’s easy to dig up the people who aren’t happy or they weren’t the right fit,” he said. He went on to add that he considers the person an outlier within the Patch sales organization and not representative of other employees. In other communications with Patch spokespeople, it was hinted to me that the person had already been slated to be fired. Again, there is no way to confirm or deny this claim.

I tried to get a sense of the general satisfaction of Patch sales staff by asking Webster what the degree of turnover is among sales reps. He asserted that it is on par with every other sales organization he has seen and that as it naturally happens, some people are a good fit while others are not. Nevertheless, he seemed to acknowledge possible challenges by citing Patch’s fast pace of growth over the course of the last year. While Webster didn’t link this directly to any specific problems, it’s not difficult to imagine that it may be difficult to effectively oversee an ever growing sales staff.

So how many people are we talking about?  The ad sales arm of Patch employs nearly 300 people. Each individual sales rep is responsible for covering a cluster of sites based on things like population and number of businesses in the area. That means the number of sites per sales rep can somewhat vary, but Webster said it ends up being 3-4 sites on average.

Are advertisers happy?

Answering this question is almost as difficult as trying to determine whether Patch is making money on its ad sales.

Advertisers haven’t been extensively sought out for comment so there are few independent accounts to go on. Business Insider cited one Patch advertiser who hadn’t yet seen big gains in his business, but was optimistic.

Meanwhile, optimism is available in abundance on Patch Sales’ YouTube channel, which features video after video of blissfully happy advertisers. All of them state that their business is up as a result of advertising on Patch.  It’s a convenient echoing of what Webster said when we spoke. “Our goal is to get customers in the door,” he stated and according to these video testimonials at least, it’s happening. How many current or former Patch advertisers might not share this view? There’s obviously no YouTube channel for that.

What there seems to be no doubt about is Patch’s dedication to advertisers and local businesses in general. Sure, readers need to be happy too, but it’s clear no one is forgetting who foots the bill. “We want to make the community stronger and we see businesses as a crucial part of that,” Webster explained. He then took it a step further when discussing whether Patch is developing long-term relationships with advertisers and spelled out the commitment to businesses in no uncertain terms: “We see the advertisers’ info as being just as important as the news.”

Truly local?

Some of the criticism laid at Patch’s feet has been that its sites aren’t truly local; that they are “local lite” if you will. For instance, a group of independent online local news publishers call themselves Authentically Local; the implication of course is that companies like Patch are neither one nor the other.

Where ads are concerned, independent publishers like Howard Owens (whose site is listed on Authentically Local as one of the founders) have stressed that they must be local and local only:

“Do you accept only locally owned businesses as advertisers? If you don’t, you should. You should make it part of your publicly known mission that your goal is to help locally owned businesses grow….  If your site currently has ad network ads, including Google AdWords, you need to remove that code from you site right now.  If you’re going to be beat Patch, you need to be all about local and only local.  And beat that drum as loudly and as often as you can.”

With that in mind, I asked Webster whether Patch was striving for a certain amount of local versus national ads on its sites. The answer seemed to be yes and no. “We don’t have a specific mix in mind, but we ideally want half or the majority of our advertising to come from the local community,” he said.

Looking at the four sites I surveyed, we can see that this goal is somewhat being met. If we only look at the local ad percentages (again, they are 0%, 20%, 34% and 43%) then the 50% mark certainly looks distant. However, if we consider both local and metro ads to be “local,” then the picture improves a bit and we would now see percentages of 41%, 56% and 49% on the three sites that have local ads (Note: I am uncertain why I saw no local ads on the Hermosa Beach site as its launch date is not the earliest of the four. There could of course be any number of explanations.)

By the way, I did ask Webster if he was aware of Authentically Local and how he felt about independent news sites in general.

Taking a conciliatory tone, Webster said that Patch didn’t begrudge any of their companions in the local news space. “We want them to succeed,” he went as far as to say, though it’s unclear whether Patch’s definition of success would match that of the indie site operators’.  “We look at everyone trying to solve this [local] problem as a partner. We may just be taking a different approach. We believe that we can serve our markets better by having a large organization behind it while still having the site run by an editor who lives and works in the town. I think there’s room for all of us to help figure out what the model will eventually be that works for local news.”

Independent publishers weigh in

To get an idea of how the ad numbers I collected looked to people who had experience selling such ads, I turned to some independent publishers.
Mike Fourcher of the Center Square Journal and other community sites in Chicago neighborhoods remarked that the Patch rate card seemed incredibly expensive in comparison with his. He wasn’t sure how Patch’s financial picture would work if the numbers I collected were in line with other Patch sites. For example, Fourcher charges $500 (corrected from $400) per month for his best ad placement, a left sidebar on the front page. The most closely comparable Patch placement runs $1,200 per month, a huge difference indeed.

The aforementioned Howard Owens, publisher of The Batavian, was unsure if the numbers showed any strategic vision on Patch’s part far as ad sales were concerned. “To build an advertising business you need to know what you want to accomplish, which is more than ‘sell a lot of ads’ or ‘become profitable’—those are by-products of solid strategic business goals, not the goals themselves,” Owens said.  He also sharply questioned the selling of national ads alongside local ones and asserted that one is not compatible with the other. “They’re trying to serve two masters—one that is entirely metric driven and another that is much more about relationships and the contextual environment.”

Methodology

As with my earlier post on Patch’s content, I studied ads on the four sites I tracked on four weekdays each in August. I counted ads on the homepage, the other top-level categories that have ads on their main pages (News, Events, Places, Marketplace, Q&A) and also the Local Voices and Announcements sections under the News heading.
Since each viewing of a given page doesn’t necessarily display the same ads each time, I refreshed each page I looked at five times. If an ad appeared on more than one refresh, it was only counted once. However, ads for the same advertiser appearing on more than one category page were counted separately each time.

If you have a question about the methodology or anything else is unclear, please feel free to leave a comment and I’ll be happy to address it.

Previously: Patch by the numbers 1: Content

Anna Tarkov is a blogger and journalist obsessed with media and politics and especially passionate about reforming the news business. Find Anna on her blog and on Twitter.

The News Leadership 3.0 blog is made possible by a grant to USC Annenberg from the John S. and James L. Knight Foundation.

By Michele McLellan, 09/13/11 at 4:02 am