AOL to launch 500 more local sites this year

NEW YORK Tue Aug 17, 2010 5:17am BST

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NEW YORK (Reuters) - AOL Inc is gearing up to launch an additional 500 websites under the Patch umbrella this year, part of a broader effort to remake itself as a destination for users seeking maps, reviews, and a grab bag of other local content.

AOL, which is trying to move past its roots as a dial-up Internet service provider, has launched 100 of these local sites so far and plans to spend more than $50 million (32 million pounds) to initiate hundreds more this year.

The move, announced on Tuesday, is part of the company's turnaround strategy conceived when it spun off from Time Warner Inc after a disastrous 10-year marriage. AOL has been since shedding properties like the social networking site Bebo, streamlining its sales force and rebuilding its ad platform to capture more marketing dollars.

"We think local will be an important part of future," said Chief Executive Tim Armstrong, who was an original investor in Patch before he joined AOL from Google Inc.

Jon Brod, executive vice president for AOL Local and a Patch founder, said that as traditional media struggles there is chasm of quality information at the community level. "That is the need Patch is filling," Brod said.

Think of the Patch sites as an online-only community newspaper led by a professional journalist who oversees a handful of freelancers who cover everything from neighbourhood crime-related events to gallery showings.

"If we build this infrastructure now as the economy improves people are going to be conditioned to use Patch to really get their message out," said Warren Webster, president of Patch.

AOL is eying $20 billion of local online advertising dollars, he said. "It's the largest commercial opportunity that has yet to be won," Brod said.

Brod said AOL first wants to concentrate on increasing Patch readership as its sales team hunts for three types of advertisers: small, locally owned businesses, banks and auto dealerships, and national advertisers interested in targeted buys.

"I like what they are doing," said Douglas Anmuth, an analyst with Barclays Capital. "It's still very very early and still in investment mode."

Patch is just one part of AOL's content offering, which also includes Seed, a platform that relies on user-generated material on popular topics, and several popular topic-specific sites like Engadget, which is dedicated to consumer electronics and tech gadgets.

AOL is in good company. Yahoo Inc is also staking a claim at being a go-to source for information, snapping up journalists, striking deals with several hundred newspapers and buying user-generated content site Associated Content.

Demand Media, a rival to AOL's Seed, earlier in August filed with regulators to raise up to $125 million in an initial public offering.

Also vying for those same dollars are countless newspapers, local TV stations, directories, and online news sites including the Huffington Post.

Andy Chapman, leader of digital trading at Mindshare, a media agency that buys advertising on AOL on behalf of many of its clients, says there is a lot of interest and promise in local marketing.

"It's not clear to me whether there is enough interest," he says about AOL's Patch. "The jury is still out."

(Reporting by Jennifer Saba; Editing by Steve Orlofsky)