April 12 (Bloomberg) -- AOL Inc., seeking to revive sales growth after buying the Huffington Post, is hiring as many as 800 full-time employees at local-news operations across the country and reducing the use of freelancers.
Arianna Huffington, the Huffington Post co-founder who became the editor-in-chief of AOL’s media operations, said she intends to increase content at the company’s Patch websites covering about 800 local markets nationwide. AOL may hire as many as one full-time journalist per Patch site, though the final number hasn’t been decided.
“Each site will now have its own team,” Huffington said in an interview. “It’s always greater and better to have a team.” Until now, content for each Patch website has been produced by a single full-time local editor and freelancers.
Huffington, who joined AOL as part of the $315 million Huffington Post deal completed last month, said the Patch sites will also incorporate bloggers and commentary. Those social elements helped her turn the Huffington Post news-aggregation model into a website that grew to attract 25 million unique visitors per month within six years after it began.
“We are basically going to make Patch a lot more social,” said Huffington, 60. “It’s a great way to have people in the town, from the mayor to high-school kids, engaged.”
Huffington said she will name a new editorial executive to work on the social-media initiative in the coming days.
AOL, spun off from Time Warner Inc. in 2009, has reported declining sales for five straight quarters. After acquiring the Huffington Post to help increase online content and boost ad revenue, AOL in March said it would shed up to 900 employees from its global workforce. Patch represents about 20 percent of New York-based AOL’s employee roster, which totals 5,000.
Today, the Huffington Post and AOL were sued in New York over claims that the writers of website content weren’t paid for their work. The suit, brought by writer Jonathan Tasini, seeks class-action, or group, status.
“The lawsuit is totally without merit,” Mario Ruiz, a spokesman for the Huffington Post, said in a statement. “As we’ve said before, our bloggers use our platform -- as well as other unpaid group blogs across the web -- to connect and help their work be seen by as many people as possible.”
AOL rose 18 cents to $19.98 at 4:15 p.m. today in New York Stock Exchange composite trading. The shares have lost 16 percent this year.
AOL Chief Executive Officer Tim Armstrong invested more than $50 million last year to jump start the expansion of Patch sites, which aim to attract local online advertising from neighborhood businesses such as restaurants, hair salons, florists and car dealers.
Armstrong backed the startup with $4.5 million in 2007, when he was working at Google Inc. AOL bought the company in 2009, after he became CEO.
The number of Patch sites just exceeded 800 and there is an upcoming debut of operations in Iowa and New Hampshire -- the two states where the 2012 presidential elections will kick off, Huffington said. There are also two new sites in Newark, New Jersey, according to Janine Iamunno, a Patch spokeswoman. That’s up from 100 sites in August 2010.
The Patch sites, designed for communities with populations of 15,000 to 75,000, face increasing competition for advertising dollars from local blogs. Rivals also include businesses like Groupon Inc., the coupon site that offers deals-of-the-day to users, based on their geographic location.
‘Dicey’ Reader Comments
“We have seen a lot of locally-targeted sites do very, very well with local advertising, and one that comes to mind is Groupon,” said Kip Cassino, research director at Borrell Associates in Williamsburg, Virginia. The local online-advertising market will probably be worth $15.8 billion in 2011, he said. By 2015, it will grow to $24 billion, he said.
“But I have real questions about the viability of the Patch model,” he said in an interview. “Their idea is you’ll want to go to those sites because you want to know what’s on the school menu, or who’s on the high school wrestling team. It’s like the local section of a newspaper. And newspapers always struggled to get advertisers into the local section.”
Chris Tolles, CEO of Topix.net, a hyper-local news business jointly owned by newspaper publishers Gannett Co., Tribune Co. and McClatchy Co., said that once the Patch sites introduce more social forums and commentary, it will be challenging to maintain a dialog among users that advertisers will be comfortable with.
Topix, which started in 2005 and has $10 million in sales, has about 5,000 local sites, in communities with populations of 45,000 or less, Tolles said. Each day, the company handles about 1,000 complaints regarding user commentary, he said.
“They’ll get a lot of heated comments and discussions at the local level,” Tolles said in an interview. “We have a lot of commentary on our sites that is dicey. But then it’s also stuff that newspapers are not going to cover.”
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