Tim Armstrong, the chief executive of AOL, is finally winding down Patch, a network of local news sites that he helped invent and that AOL bought after he took over.
At a conference in Manhattan last week, Mr. Armstrong suggested that Patch's future could include forming partnerships with other companies, an acknowledgment that AOL could not continue to go it alone in what has been a futile attempt to guide Patch to profitability.
He called it, somewhat hilariously, "an asset with optionality." There may be a few options for Patch, but none come close to the original vision for the site.
The hunt to own the lucrative local advertising market, Mr. Armstrong's white whale, is over. But Patch did not go quietly—hundreds of people lost their jobs over the last six months—and neither will Mr. Armstrong.
"Patch has more digital traffic than a lot of traditional players have," he said in a phone call on Friday, still defending his pet project.
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"The long-term vision was clear: If you get the consumer, can you get the revenue? And we have a whole bunch of Patches where the answer is yes. But we rolled it out on a national basis and we've had to adjust based on the investor commitments that we have made."
As he spoke, he said that the turnaround at AOL as a whole was going well, and the market seems to agree—the stock is up 45 percent this year and advertising revenue has gone up every quarter. He said that overcoming the worst merger in business history—the company was finally spun out from Time Warner in 2009—required "big bets in white spaces of opportunity," some of which worked out, and some, like Patch, that didn't.
But Patch was not just one more bet. When the boss has a big idea, the employees treat it as the more equal among equals.
That is not how things usually go when a digital executive is in charge of a company. Silicon Valley is built on a series of rapid failures until a winner emerges. It is a fundamental tenet of the digital era that the losers are quickly shot and slid off into the river. "Fail fast forward" as the saying goes.
But Mr. Armstrong had a sentimental, and some would say debilitating, attachment to Patch. He helped create it in 2007 while a senior executive at Google. When he got the top job at AOL in 2009, he persuaded the company to buy it. Patch then proceeded to churn through leadership, business models and write-downs on the way to its reduced state.
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The board of AOL, handpicked by Mr. Armstrong, authorized him to invest $50 million on the idea in 2010 and after that, it became a black hole for cash. By the end, it had cost an estimated $300 million. (AOL said the figure was more like $200 million.)
Mr. Armstrong's big dream had become a nightmare that wore out his shareholders and set off a proxy fight in 2012. The hedge fund Starboard Value ran for three seats on AOL's board, saying it did not believe Patch was a "viable business."
The insurgents lost the war, but turned out to be right. Mr. Armstrong was able to keep the peace with other AOL investors in part by engineering a $1.1 billion sale of AOL patents to Microsoft and returning much of that value to the shareholders, but the additional time—or was it rope?—that he secured did not change the outcome at Patch.