How profitable Patch is automating ad buying

Patch, the hyperlocal news network started by AOL and now owned by Hale Global, is looking like an unlikely local news success story, with 2018 looking to be its third year of profitability in a row.

Key to its model is that it started requiring small advertisers to use its self-serve tools to promote themselves and goings-on. (Those wanting full service would have to spend $4,000 and up.) It created three DIY products, to promote jobs, announcements and events, and it’s improved their usage by putting a relentless effort into user feedback.

The tools were making money, but Patch wasn’t sure if it was getting repeat business, which was essential for the model to work. So it started using Net Promoter Scores to gauge their loyalty. A few days after placing an ad, a user would get an email asking them to rate the ad products. Users ranked them a depressing -41. The score is calculated by subtracting the percent of people who give a low rating from those who give a high rating. Many industries don’t get above a 50, but needless to say, anything in negative territory is bad news.

“You’re slightly less popular than Satan,” Warren St. John, CEO of Patch, said grimly.

The cost was the biggest complaint, so the first thing Patch did was slash the price. A calendar event went from $20 a week to $1 a day and job ads went from $100 a month to free. It also made it easier to post the ads and made them more prominent in Patch’s daily newsletters. Those sent the Net Promoter Score up to 60. Paid DIY posts are up 300 percent and repeat customers are up threefold from a year ago. This month, Patch expects to make more money even on the cheaper products than it was before because more people are using them now.

Still, the needle has to move a lot more for Patch to reduce its dependence on direct and programmatic ad sales — the average expenditure for event and calendar announcements is not thousands or even hundreds, but $28, and DIY sales represent just 5 percent of revenue — but it’s a start.

NPS is common way for many consumer industries to benchmark themselves, but more unusual, Patch has gone beyond its ad tools and started using the NPS to measure response to its editorial content. Ten percent of desktop users see a box asking them if they’d recommend the site to others, and why or why not. A six-person product team collects the feedback and figures out how to incorporate it into the site.

Publishers have other ways of measuring audience loyalty by looking at repeat visitors, for example, but the surveys’ value is that it’s a way to solicit comments. One of Patch’s nine regional groups of sites had a lower score than the others, and by analyzing the content, Patch determined that the group was over-indexing on breaking news at the expense of community news. The company has added more editors in response to feedback that people wished the articles were more timely. The company also pays attention to feedback about things like feedback about ad load and page speed.

“You’re not a slave to it,” St. John said. “It’s a data point. But if you have a community saying, ‘we wish you would cover an issue you haven’t been covering much of,’ that’s relevant.”

Jen Rodstrom, a customer service expert at the Temkin Group, which consults companies on user experience, said NPS is best used to ask open-ended questions and like surveys in general, tends to get more response from unhappy customers. But as a listening tool, it’s relatively easy to understand and there are industry benchmarks that can serve as a comparison. “It can’t be your only source of feedback,” she said. “It’s important to have a lot of listening posts to have a more comprehensive view.”

The next phase for Patch is to create new products to get the DIY products in front of more people. To that end, this week it’s launching a newsletter just for calendar events, and it plans to test another one just for user-generated announcements and posts.

“The more hyper-local we are, the more engagement we have,” St. John said.

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