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CEO Tim Armstrong on AOL's Big Local News Bet

AOL is placing a major bet on the local news market — announcing today that it's expanding its Patch hyper-local news sites to 500 markets around the US. And, for a change, this is great news for the news profession.

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As Patch expands from just 100 sites today to 500 by the end of the year, AOL will be hiring 500 full time journalists. Yes, in this era of layoffs, shuttered bureaus, and free Web content, AOL will be hiring more journalists in the US than any other company this year.

In an exclusive interview (see video, below), Tim Armstrong explained why he's staking such faith in local news, even though the local ad market has been incredibly volatile.

Armstrong says local markets are incredibly underserved, which means an untapped opportunity. AOL isn't just putting articles on Patch's local sites, it's also digitizing towns' information, like school schedules and business listings. Perhaps most importantly, Armstrong says Patch can operate in local areas "deeper" than a local newspaper, at just 4.1 percent the cost of a news print operation.

Armstrong didn't deny that AOL's advertising continues to tank, despite overall growth in the ad market. In the second quarter AOL's display ad revenue fell 28 percent and display ad revenue fell 13 percent. But Armstrong says they've intentionally been giving up some ad revenue — shifting away from growth revenue to growth profitability.

So what is the future of AOL? Armstrong says it aims to be the largest digital media company with local content and as branded entertainment.

I couldn't help but ask whether AOL needed to ditch its name and all those "you've got mail" associations. Armstrong adamantly insisted that the only reason AOL's still around is because of the brand, and they're going to stick with it. Still, I'd like to point out that when it comes to rolling out Patch, this new brand is in the spotlight, not the old AOL name.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.