Some News From Patch

Patch Media Chairman Charles Hale sent the following note to Patch employees today:

Ladies and Gentlemen of Patch,

I have a rather lengthy note below to update you on what we’ve done over the last 12 months, what we are doing this year, with a big announcement at the end -- so read on.

Before I launch into the details, I have to note that Patch's second year as an independent company has been disheartening and depressing….but only for those having written Patch obituaries! We’ve grown our audience, pushed numerous technological innovations and made incredible progress on the business challenges of hyperlocal -- all in service of our ambitious goal to become the definitive national platform for local news. We’ve got a long way to go, and we’ll never allow ourselves to become complacent. But we’ve also made incredible progress.

What We’ve Accomplished So Far

Thanks to the talent and passion of everyone at Patch, we've grown our audience in the last 12 months from 14M UVs to 20M-23M, depending on the month. We’ve done this the hard -- some would say, the real -- way: organically, without a single bought page view. Two-thirds of our monthly users are return users -- an impressive statement about our users’ loyalty and a marked contrast from viral publishers who seem to get so much attention these days. Those loyal users also contribute to our remarkably stable and consistent traffic pattern, one that is less susceptible to the vicissitudes of virality and that in turn allows us to plan more confidently for the future.

Our astounding and possibly unparalleled QA and Dev teams have accomplished an incredible amount in the last several months. We’ve launched Facebook Instant Articles for all of our content, Google AMP, and are midway through the roll out of 950 hyperlocal Apple News Channels. This week we launched our new CMS, My.Patch, along with our very popular local community calendars. We’ve cut page load time by more than half and architected our platform to handle huge spikes in traffic, including a shot of 250,000 concurrents in February, without a hitch. Our SEO is to the point that we are competitive with the most elite publishers, as we have proven numerous times over the last few months on Primary nights.

Led by our ex-Nebraska QB Taylor Martinez, as well as Damian “Revenue” Noto, and backed up by our QA and Dev teams, our new app is in internal beta, and should transform the way users interact with Patch by allowing them to manage and customize hyperlocal notifications for multiple communities. It’s also beautiful and intuitive, and we’re very excited about it.

We've also expanded this year, creating new Patches in Brooklyn, Illinois, Connecticut and on Long Island, and launching Patches in the new territories of Austin and Portland, with more new territories on the way. We've launched metro Patches in Boston, DC, Chicago, LA, San Francisco, San Diego and Atlanta that are already among our fastest growing and highest trafficked sites, and we will soon begin turning on state Patches for all 50 states, giving everyone who visits Patch some level of local news to sign up for. Along the way, we have published an amazing amount of fantastic local reporting and countless incredible stories -- many of which would never have seen the light of day were it not for the presence of a hyperlocal publisher like Patch.

We’ve also made great progress with users. As anyone who was here at the spinout of Patch as an independent company will attest, most of the emails we received during our first few months were complaints, expressions of frustration and not a few exhortations that we should go to hell. (Or worse.) Now the biggest complaint is from people who don’t understand why we haven’t opened a Patch yet in their communities. (Oklahoma City -- we hear you and we’re working on it.)

On the sales side: for close to a year now, Richard Sands and the local sales team have been beating sales targets while hitting a fully loaded cost of under 30% of local sales. For local sales, this is an achievement many generations of Patch's best and brightest had heretofore been unable to achieve. The national and regional team has been on a tear lately, thanks in part to clarity on our new branded content offerings. Given our politically active audience, we have a big opportunity in the coming months with campaign spending as well. Expect more news there in the coming weeks.

Thanks to our newest executive committee hire, Michael Shaughnessy, who is joining us from About.com as VP of Programmatic (while also running direct sales - thank you, Mike), the revenue front looks promising. Michael, with Cho, and QA+Dev, has introduced significant innovations to our ad tech stack, and has started making changes to our selling approach that will help us increase CPMs across the network and that are already bearing fruit.

On the cash front, cash remains in the $10m range for the 2nd year in a row. We have no debt, no loans, no equity raises, no financial voodoo. Abdul-Hakyim has gotten collections down to the lowest delinquency rates Patch has ever had. In short, we are maintaining our healthy cash position. We finished Q4 2016 EBITDA positive and beat Q1 2016 plan.

What We’ve Got Ahead of Us

We have a monstrous amount of work ahead of us, and as recent news has made clear, no digital publisher can afford to stop innovating. With that in mind, the executive team unanimously passed some stretch goals for itself and for Patch in 2016. We’re aiming to double our audience to 50M UVs, improve monetization of our pages by 35% and to diversify our revenue streams so that 50% of bookings come from non-display sources. We’ve also set ambitious goals around internal reporting and analytics, because we know that the more visibility we have on our business, the better chance we have to improve it. All of this is in service -- it’s worth repeating -- of building Patch into the only local news platform with national scale, one that publishes great journalism and strengthens communities by giving users deeper insight into the world right outside their doors.

Changes Ahead

Now, for some news -- and apologies, especially to our editors, for burying the lede: I'm thrilled to announce the appointment of your current editor-in-chief, Warren St. John, as our new CEO. In this capacity, Warren will assume responsibility for something he has already done so well: safeguarding Patch's mission and culture while making our type of local journalism viable as a career and enterprise. He will assume day-to-day managerial responsibility for all aspects of Patch. I have assumed the Executive Chairman role, and am focused on talent development, add-on acquisitions, and helping our sales team when needed. Warren will retain the title of Executive Editor, and be transitioning his responsibilities as editor-in-chief.

We interviewed scores of talented executives who sought the Patch CEO job. The Hale Global team felt that none could compare to Warren. He exemplifies what we know about talent: that those with incredible talent show it elsewhere in their lives -- in Warren's case whether as a New York Times reporter, best-selling author, sailor, bluegrass player, cyclist or editor-in-chief. Warren has become a standout manager while being a passionate advocate for Patch — because he believes in our mission and the value of the work we do for our communities.

Please join me in congratulating Warren, and congratulating Patch!

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Charles Hale, Patch Media Chairman

Patch.com

charles.hale@patch.com