Hundreds of employees were laid off at Patch today, just two weeks after AOL handed over the majority of its stake to Hale Global.
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Most of the journalists from its 900 hyperlocal sites were terminated, along with many of Patch’s corporate employees. Fox Business previously reported that Patch layoffs were imminent.
Just months ago in August, about 400 Patch employees were let go. It was once a passion project for AOL CEO Tim Armstrong that had more than $100 million into it after being purchased in 2009. Patch was never profitable and the investment steadily unraveled.
An internal memo from AOL says that today’s layoffs are because “Patch’s open platform design will reduce the required level of employee support.” Patch will be producing less original content and aggregating from other news outlets. “All sites will remain open,” the memos says.
A source with direct knowledge of the situation tells Fox Business that a “skeleton team” of about 50 journalists will continue reporting efforts for Patch. Under 100 employees remain at Patch overall. The source says that at the eleventh hour, Tim Armstrong saved the journalists providing content at his local Greenwich Patch. AOL still owns about 40% of Patch.
“The issue with Patch under AOL was that the property was very people intensive, and difficult to scale. With the partnership with Hale Global, it appears that they are looking to streamline the business, especially around the editorial staff,” says Neil Doshi, analyst at CRT Capital.
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Patch’s struggles were a badly kept secret, so the layoffs did not come as a surprise to many. A source says that “everybody knew it was coming, so people were not particularly upset.” The terminated employees were “pretty jovial” and those who worked at AOL corporate went out drinking at bars after.
Due to the WARN Act, legislation regarding protocol for mass layoffs, former Patch employees will be receiving a minimum of two months pay. Corporate level vice presidents could be getting up to six months salary. Bonuses will be paid out in full.
Fox Business previously reported that AOL tried to sell Patch to a media buyer and had deal conversations with Gannett and Tribune. Negotiations stalled and Armstrong was eager to find a solution for Patch, after promising that a partnership would be finalized by the end of 2013. The terms of the Hale deal were not disclosed, but one person with direct knowledge of the transaction says that AOL did not come close to recouping its investment in Patch and the terms would be an “embarrassment” to the company.
AOL did not respond for comment.