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What Yahoo and AOL CEO Tim Armstrong learned from Patch’s struggles

Patch was a big, risky bet that taught Armstrong “discipline,” the Verizon media boss says.

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AOL CEO Tim Armstrong onstage at TechCrunch Disrupt NY 2016 Noam Galai/Getty Images for TechCrunch

Tim Armstrong runs a “house of brands” at Oath — the Verizon subsidiary that contains AOL, Yahoo and all of the organizations that they own, including HuffPost, Tumblr and TechCrunch. But one brand that’s no longer in-house, the local news site Patch, taught him a lot about how to run the rest.

“There were two things with Patch that were problematic,” Armstrong said on the latest episode of Recode Media with Peter Kafka. “One was, it was a massive bet inside of a turnaround company. It was almost like a pure VC bet at scale, a significant bet on a really risky area.”

Armstrong founded Patch in 2007, and when he became AOL’s CEO, he acquired it in 2009. And until majority ownership of the company was sold to Hale Global in 2014, he weathered constant doubt and criticism from both investors and the media over the brand’s losses. However, he said, on “very small amounts of the property” — meaning, in a small number of the cities and towns that got local news sites on — it thrived.

“The lesson was, we should have tightened way further down on the towns that were working, and then made sure they were getting replicated exactly out in the market,” Armstrong said.

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Armstrong praised Patch’s new owners, noting that it’s now profitable and growing. And he still believes that the calculus behind the site was right — just too early.

“There’s a bunch of math behind it all; we studied it for two years before we launched Patch. How much an average person moves — we studied the individual towns, we studied the economy in an individual town — there’s some amazing statistics. There will be a super significant business in local in the future.”

He also reflected on how what he learned from Patch’s struggles helped him think smarter in the future; for example, during the AOL-Yahoo merger that created Oath.

“There’s two sides of the coin: One is listen to everybody, and two is listen to nobody,” Armstrong said. “The reality is, what you need to do is listen to the best judgment you possibly can and try to look at the best data you possibly can, and there’s going to be some unknowns. The mistake I made [at Patch] was going too bullish down a path without making sure those metrics were actually coming true in all the other markets.”

Today, the older and wiser CEO says his job is “managing reality,” both with existing brands and new projects. Ambitious Patch-like ideas that he might bet on if he were a venture capitalist are made to justify their own value with data, rather than feeling.

“All these ideas that are coming through right now, I’m putting through a very stringent filter with the management team,” he said. “The results that we will end up getting as a business are coming from our discipline.”

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