A patchwork of media sales information

2179915522_feea59109b_oOK, so I am perhaps obsessing about Patch, the local news arm of AOL, but, in my defense, there is simply too much valuable business information and business lessons to leave it be (read about AOL’s CEO’s public firing of Patch employee Mr. Abel Lenz here, an object lesson in how not to deal with employees, and read more about AOL CEO’s somewhat muddled explanation for the firing here, and object lesson in how not to communicate.)

As I mentioned in an earlier posting, there seems to be a leak problem at Patch, which appears to be increasing as the organization is coming under stress.

For whatever reasons, Mr. Jim Romenesko appears to be the recipient of the bulk of the leaked information from Patch, which, to our benefit, he promptly posts on his blog (here.)

Recently, Mr. Romenesko posted leaked memorandums from Mr. Jim Lipuma, Patch’s head of sales in the United States, which are extremely interesting because they share critical — and presumably confidential — information about a morale and sales crisis at Patch and, amazingly, share key information about sales performance and targets at Patch — something that is almost certainly some of the most confidential information in a corporation.

I will leave the morale and crisis information alone (you can read about this in the leaked memorandums here) and zero in on the part of the part of the memorandums that deals with sales performance and targets.

Here is the pertinent text:

We are nearly 40% through August, which means that you should be over $9,000 in Bookings right now. Are you there? Do you have plans to be over $14,000 by the end of the week?

We had $36K day yesterday, when we need to be having $100K+ days. I understand why yesterday happened, but we cannot settle for days like this going forward. We’re in the game and swinging. This is not the time for bunt singles. This is the time to drive the ball and swing big. Do it for yourself, your families and the 1,200 people who call themselves “Patchers.”

Here is what we can learn from this little paragraph:

  • There are 1,200 patchers. Assuming a loaded per employee cost of $75 thousand per year, Patch needs $90 million to cover employee compensation, including benefits.

    Yes, I know, I know… $75 thousand is an arbitrary number. The issue, of course, is that it is unclear how many of the “Patchers” at Patch are freelancers and part-timers. Besides, over at Glassdoor, there is a lot of griping about the pay at Patch being poor, so, in the absence of better data, I stick with $75 thousand.

  • Evidently, Patch needs to generate in excess of $100 thousand per day in net new business from the United States market in order for the machine to run — albeit somewhat haltingly (see below for a discussion of profitability.)

    If we assume 260 working days, Patch’s sales people in the United States needs to secure $26 million per year in net new sales.

    If we instead assume that the days that Mr. Lipuma is referring to are calendar days (more likely, I think,) then Patch’s sales people in the United States needs to secure $36.5 million per year.

  • The monthly sales target of Patch sales people for net new business appears to be $22,500, for a yearly sales target of $270,000.

    Accordingly, on a 260 days basis, there must be something like 100 Patch sales people addressing the United States market, or one per nine sites and the expectation is that each site generates between $25 thousand and $30 thousand per year (before the recent reduction from 900 to 600 sites.) On a 365 days basis, there must be something like 150 sales people, each covering six sites with each site generating approximately $40 thousand

The information that we gleaned here is nicely consistent with the information that we can learn through public disclosures and news media reporting. For instance, from Encyclo, the new reporting arm of the Nieman Journalism Lab at Harvard University (here,) we can learn that:

AOL bought Patch in 2009 for $7 million and announced in early 2010 that it would take its network from 30 sites to “hundreds” by the end of the year, pouring $50 million into the company in the process. AOL reported putting $75 million into Patch in 2010 and $160 million in 2011. It expected Patch to lose money in 2011, and other reports confirmed this, with one estimating its losses at more than $100 million and another reporting its revenue as $13 million against expenses of $160 million.

AOL did not give overall Patch profit figures, but reported that 100 of its 900 Patch sites were profitable at the end of 2012. Patch’s revenues increased in 2012 to $34 million, but it also laid off about 20 employees and consolidated its geographic regions in May 2012 and made further layoffs and regional consolidations in May 2013. Patch reportedly remained unprofitable at the end of 2012, and AOL expressed a reset goal to have it profitable by the end of 2013.

In mid-2013, AOL reported that about 300 Patch sites had a “viable business model,” and said it would try to close, sell, or find partners for 300 other Patch sites that it said were not on track to profitability.

Patch has been met with various criticism over its staffing, revenue model and ability to reach local audiences. Incidents of plagiarism at Patch sites in California and New York and concerns about the overall quality of Patch reporting led some to question the experience of staff writers as well as the hours and workload those journalists face and the pay they are given, as well as their pressure to produce quantifiable results.

So, the information provided by Mr. Lipuma is certainly in the right ballpark, which means that critical information about sales targets for individual sales executives and for individual sites is now available for competitors and customers. That just can’t be a good thing for Patch.

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