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Is the Patch revenue model sustainable?

BusinessInsider makes a strong case for a flaw in the (apparent) business model of Patch. It bases its assumptions on this LA Times article. Key quote from LA Times:

“The incremental revenue from each view of an online display ad remains remarkably small. Patch.com asks for $15 for every 1,000 viewers it brings to one form of online ad that businesses create themselves. So if every one of 40,000 households in the South Bay’s three beach cities clicked on a page with that ad, Patch would earn $600.”

BusinessInsider does the math on a reporter making $38 – $45k per year, a number the LA Times uncovered. Patch also has stringers who earn $50 for a 500-word piece. Check out the math and you’ll see that, with some generous assumptions (A $15 CPM?), the local Patch makes $33 in month six of operations.

Now, we know perfectly well that a company wouldn’t present this as its business model. And there has to be an assumption that there will be other sources of revenue. We just haven’t heard what those sources are. Indeed, BI writes that Patch could charge a premium for good placement, but that premium would have to be substantial. There are other possible forms of ad revenue – couponing, etc. We’re interested in hearing your thoughts on how Patch could perform better. We’re all looking for the right business model — so are we missing something huge with Patch?

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