Patching up? Tim Armstrong’s hyperlocal-news baby has numbers to brandish against hostile shareholders

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Tim Armstrong. ()
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AOL's Patch has been taking a beating lately thanks to Starboard Capital, an investor group that thinks the costly community-journalism venture should be shut down.

But Patch has some good news to spin this week as Starboard, which owns about 5 percent of AOL, gets ready to vie for three seats on the company's board at AOL's annual shareholders meeting this Thursday.

The network of some 850 hyperlocal news sites, which was co-founded by Tim Armstrong in 2007 and acquired by AOL two years later when Armstrong became C.E.O., says it logged its highest traffic and revenue numbers to date last month, finishing May with 11.7 million users and a 14-percent revenue bump from its previous revenue record in November of 2011. A Patch spokesperson declined to quantify the revenue increase more specifically.

“We are laser-focused on continuing to serve our users and advertisers with high-quality content and impactful products, and building upon our success to date in innovative and engaging ways,” said Patch co-founder Jon Brod in a statement.

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Patch is under mounting pressure to start making money after reportedly losing somewhere between $100 million and $147 million in 2011. Starboard said in a recent report that it does not believe Patch is a "viable business."

The venture is Armstrong's pet project and he says he's committed to scaling it. He also says it's on track to generate between $40 million and $50 million in revenue this year.

But skepticism abounds, and the localized display advertising strategy at the core of Patch's business model has so far failed to show signs of long-term growth.

Some Patch sites did, however, turn a profit in 2011, Armstrong said in February.