When your main seed investor becomes the CEO of AOL, it does have its fringe benefits. Today, AOL announced its acquisition of two local startups: Patch and Going. AOL’s new CEO Tim Armstrong is a seed investor in Patch, which offers hyperlocal news for small towns and communities. In a note he sent out today to employees, which we’ve obtained from AOL, he notes that he recused himself from the acquisition negotiations and that instead of profiting from the deal he asked to get his initial seed investment back in AOL stock when it goes public. Going is a local event and entertainment listing site based in Boston which raised a $5 million Series A in 2007. Both acquisitions were in the single-digit millions.
Below is Armstrong’s email to employees, discussing the reason for the acquisitions, which is to ramp up AOL’s local presence (one of five main strategies he is pursuing:
AOLers –
Our strategy to win in the five areas we’ve discussed starts with innovation and passion. Of the five areas, Local remains the largest white space and offers us an ability to improve the lives of many consumers. It’s a space that’s prime for innovation and an area where we already have strength with a local network that reaches more than 54 million UVs a month and a valuable brand in mapping services, MapQuest.
Our vision isn’t just about optimizing what we have – it’s about overhauling how we approach this space, drawing on our legacy of connecting communities and our long history of organization through DMOZ. It’s about taking one of the most disaggregated experiences on the Web today and making it truly quick and easy for consumers to find the local information they need.
Today, we’re announcing two acquisitions that will enable us to better serve audiences by providing experiences that are highly focused on users’ own neighborhoods – Patch and Going.
Patch.com was built to provide local towns with a robust and interactive platform to publish news and information, with full-time journalists for each town covering government affairs, education issues, and community events. One of the AOLers in our All Hands meeting on May 29 asked what our plan is to help towns, like his, where the local newspaper has gone out of business. Patch is an acquisition that may eventually help that town. Under the leadership of co-founder and CEO Jon Brod, Patch has been able to launch five initial town sites since February and has just announced four additional communities. Moreover, Patch has already received over 230 user requests for “Patches” spanning 39 states and 12 countries.
The second acquisition is a small company located in Boston – Going. Going has developed a local events platform to discover and share information about things to do in a number of leading cities across the country. Under the leadership of CEO Evan Schumacher, Going has launched sites in 30 cities – including New York, Chicago, Los Angeles and Miami – and provides users with RSVP tools and advertisers with self-service event advertising.
On a personal note, I was an early investor in Patch and committed significant dollars to the vision of improving local communities with deeper online information, accountability through journalism, and a platform for communicating. In discussing our local strategy, AOL and Time Warner looked at Patch as a possible acquisition and I recused myself from that process. At the Time Warner negotiated acquisition price, I was in a position to earn a return on my investment in Patch. However, I have decided to forgo any profit from my seed investment in Patch and I have asked to receive just my seed capital in AOL shares once we separate from Time Warner.
Overall, I believe both Patch and Going will add strength and talent to our local efforts and give us an ability to have a unique and defendable local offering that helps people improve their lives. I’m excited that we’ve reached the stage where we can begin implementing in our five key strategy areas, and with today’s announcements we’re off to a great start in Local.
Please join me in welcoming the employees of Patch and Going to AOL and the future of AOL Local. –TA
looks like cheap knock-off of everyblock…
…said an everyblock founder or employee, who wishes it was his company that was acquired…
AOL buys Going and Patch. Aquisition game starting again? {seesmic_video:{”url_thumbnail”:{”value”:”http://t.seesmic.com/thumbnail/lasbsytLFO_th1.jpg”}”title”:{”value”:”AOL buys Going and Patch. Aquisition game starting again? ”}”videoUri”:{”value”:”http://www.seesmic.com/video/1zDfLt0GUL”}}}
This is a good use of that dial up cash. Plus these dial up people are the people looking for local news. Aol should be able to grow these sites very quickly and get this news in front of their users.
Congratulations to both Going and Patch. And also to AOL since plugging these sites into their platform should ramp the traction of both.
I don’t want my local news source owned by the same people who ripped me off on my internet connection for 4 years.
‘goodbye’
here comes the yardsale network aquisitions era.
patch work only works for a little while when sooner or later it will all have to be replaced.
BuyLocator.com – going, going, gone.
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Just looked at Patch. Think it makes much sense. Local community stuff is huge. I’m sure we’ll now see IACI start their acquisition machine to keep up with the Jones’.
Going was probably Going out of business so Tim just rescued them!
Boston based Progress Partners had a deal in this – they shopped this one to death.
I bet they begged AOL to take them at a discount.
We prefer to refer to it as “being thorough and not leaving a stone unturned”, but thanks for the plug.
Word on the street has it that you can’t even plug your own deals in your own daily newsletter. Sad.
“Single-digit millions” is actually pretty misleading for these deals.
A more accurate description would be both got taken down at closer to $1M, with going fetching a little bit more.
Says who?
The other question is was Patch actually doing well or was Armstrong finding a way to get back his initial $$.
Nepotism at its worst. AOL should look for real local startups instead of these crap companies.
If they were smart they would go after this new website Uofnfo.com, which reaches the college niche market.
Link doesn’t work – actual site? never heard of it.
Haha… Yes they were going out of business. All these event sites totally blow. That includes Eventful and Zvents. All are buying up traffic to boost their numbers. And all are losing money on every visitor. It’s a cash poor niche.
Amazing, isn’t it, that when TW announced AOL’s spinoff “sources” said: “No new acquisitions for AOL”.
http://kara.all...-press-release/
That was less than two weeks ago. At least this proves we can take anything Kara’s “sources” say with a grain of salt.
Both acquisitions will fall flat on Armstrong’s face. Except to see them written off by the end of the year.
Thanks Erick. In addition to local, do you happen to know the other four strategy areas?
Patch has almost zero traffic. How is it worth anything? I guess they wanted to overpay for the domain name.
Well if we wanted proof it is here: it is not what you know, it is who you know.
Patch has five communities worth of content and is an acquisition target?
quid pro quo exits.
I admire the writing style email. I’ve read way, way too many such emails that lack simplicity, focus, and have too much PR baggage. Tim’s email told me (not part of AOL) what their plan is, why these acquisitions fit, and how he kept himself at arm’s length.
Bodes well for AOL (plus he uses punctuation, caps, etc. — obviously unlike some recent CEOs who seemed to believe such little, stupid personal affectations matter.)
good luck on that
thts it, no more hope for AOL, loser buying losers doesn’t make it winner
RIP AOL
It’s sad that Going was sold for 5 million when they had much more VC money than that invested.
AOL made a really bad decision here. I feel bad for Highland and other who invested and took a haircut in this deal.
Going: single digit millions is a far cry from what they were looking for at the end of last year. The CEO is a schmuck.
Schmuck? lol – seriously – the CEO is an a-hole
I find it funny that AOL buys Going – and at the same time is thrown out of Time Warner and is trying to offload a ‘real’ social networking site called Bebo… seriously – wtf
Doubtful if these acquisitions are GOING to PATCH the problems of AOL.
Unfortunately I can’t comment on this.
I have never commented on a blog and never will.
AOL is positioning to dominate the hyper local search marketplace. AOL’s acquisition of going and patch will take the lead in local search. The competition in this marketplace will be fierce.
Spectrum Bridge, parent company of SpecEx