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Wednesday October 22, 2014

Patch Struggles Toward Profitability

Image representing Patch as depicted in CrunchBase

Image via CrunchBase

AOL has spent $160 million on Patch, but in 2011, it made only $20 million. Patch has been plagued with problems—low profitability, high-level departures, budget issues and the now the prospect of layoffs.

Investors aren’t happy, either. In December, activist fund Starboard Value LP berated the management in a widely circulated letter. Insiders told Fortune that Patch would need ten times its current revenues to be profitable.

Patch has 10 million unique visitors, or about 11,587 visitors at each site. Traffic has more than tripled in 2011 and 2012 revenues are already half of last year’s. Warren Webster, president of Patch, told Fortune, “We’re not losing money—we’re investing. We’re not struggling. And we’re not a turnaround.”

Still, analysts say Patch is a drag on AOL’s future growth.

Fortune