In an effort to blunt critics of its strategy to keep funding its hyperlocal news network, Patch, AOL announced record traffic to the sites in May.
Patch's combined websites had 11.7 million monthly unique users in May, a 14% increase over April and a 10% increase over its record of 10.6 million users in August 2011, according to research site comScore, AOL said in a news release. Patch provides online coverage of more than 850 towns and cities around the country. It is part of Chief Executive Tim Armstrong's strategy to develop AOL as a media company with original content supported by advertising.
In a note to employees, addressed as "Patchers," Jon Brod, CEO and co-founder of Patch, called the traffic figures "a reminder of all we've accomplished together to date, and as a shot in the arm for the months and years ahead...thank you for the role you've played in our success to date, and particularly in our big wins in May."
AOL's investment in Patch is a point of contention between Armstrong and New York hedge fund Starboard Value LP, which owns 5.3% of AOL and is the company's fifth-largest investor, according toBloomberg. Starboard wants to get rid of Patch as well as replace three of the company's directors, according to an investor presentation filed with the SEC May 23.
Good morning Patchers,”
"We do not believe Patch is a viable business," Starboard wrote in its filing. On Thursday, AOL's shareholders will meet in Boston to vote on nominees for the company's eight-member board at its annual meeting.
AOL said that Patch's revenue in May rose 17% from April and was 14% higher than its monthly revenue record in November 2011. Patch spokeswoman Janine Iamunno declined to say what the site's monthly revenue is. Armstrong said last month that Patch will generate between $40 million and $50 million in total revenue this year. The company hasn't released last year's revenue figures, but Starboard estimated the sites generated $13 million in 2011 ad revenue.
"Seeing traffic and revenue at an all-time high illustrates that we're on the right path for success in the second half of 2012 and beyond," Mark Josephson, senior vice president of revenue at AOL's local division, which includes Patch, said in an email to FINS. "The amazing content and audience growth being driven by our editorial team inspires our sales team every day."
One analyst called the traffic numbers "progress," but not likely to sway Starboard. "Patch needs to show more rapid growth and a greater financial impact for it to be meaningful to the overall debate around the network's future," said Clayton Moran, a Benchmark Capital analyst who covers AOL.
Patch employs about 1,000 journalists and a few hundred sales people. The network said last month it laid off 18 managers as part of a reorganization designed to streamline management.
Patch recently launched its "Patch Partners" program to grow its relationship with local businesses as well as a partnership with the New York television station WPIX, in which a New York-based Patch correspondent delivers top local stories from Patch's headquarters during the evening news.
Write to Damian Ghigliotty at Damian.Ghigliotty@dowjones.com