Design for manufacturability is an engineering concept where you take into consideration the cost of the manufacturing process when you design the product. If you don’t do this you may have to redesign your product when you realize the original design is too costly to produce and make a profit.
I think that is where Patch went wrong, because sometimes it’s not easy to redesign. It may be impossible if your runway isn’t long enough.
Like Steve Buttry, I never closely studied Patch but am intimately familiar with the kind of traffic a local news site gets. It becomes easy to see why business was a challenge for Patch if their whole business model was display ads. (Was it? Correct me if I’m wrong.) I think it’s safe to say it was the biggest part of their business plan.
News sites in Patch sized communities only do a few million pageviews a month. The CPM for display ads is on a decline and I’m going to suggest Patch was undercutting some of the local newspaper sites. We all know the remnant ads bring in less, usually way less.
Practice with your own numbers by dividing x million pageviews by 1000 (cpm units). Multiply that by 2 or 3 ( the number of ads on a page). Multiply that by what you think the average CPM is (I bet it’s lower than you think). Is that the monthly revenue?
That might be enough for a scrappy team that is really killing it locally to get by. And those types of numbers are enough for small teams with global audiences. But it likely isn’t enough to also fuel the millions that the central office at AOL needed to develop the Patch product.
I think that’s where Patch was losing. AOL is used to big, big numbers. It’s hard for them to think small, on what it takes to be profitable on a local level, while maintaining a lean central office.
That is the one advantage that the former newspaper companies have. They’ve been doing that for a long time. But . . .
And it’s a big but (that doesn’t sound right).
The former newspaper companies still live in a world where cost is way too high for pageviews alone to support. Part of this is transitional legacy costs and part is a culture of using big commercial third party tools when we need to get scrappy, wear many hats and use freely available tools like our scrappy upstart competitors do. “Get scrappy” is the way to win in local.
More and more you’ll see folks at news sites that combine skills of journalists, developers and marketers. You see that at some of the small, successful local news startups that are staying afloat. This will be the norm in the future.
Also, and perhaps even more importantly, invest in other revenue generating ideas, software and companies that are not based on pageviews because with the accelerated growth of inventory across the web comes a decline in CPMs. This includes letting internal ideas blossom into their own products, the way Google and Amazon offer internally used products like their cloud to the public. If you find it useful internally, others will likely pay you to use it.
Display ads alone will not do it.
Patch didn’t make it because it was not properly designed to scale. It wasn’t designed for manufacturability (DFM). ; )