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AOL Launches $10 Million Hyperlocal VC Fund

NEW YORK: AOL is stepping up its focus on local content by launching a $10 million venture capital fund for related start-ups, reports. The Internet Service Provider turned content distributor is already drilling down into the hyperlocal arena with its expansion of AOL’s annual report indicated it planned to invest $50 million in the hyperlocal news site that covers around 40 small towns in New York, New Jersey, Massachusetts, Connecticut and California. AOL acquired Patch last June for a reported $7 million. It recently revealed plans to add 15 more hyperlocal sites over the next three months.

The strategy puts AOL in competition with many local broadcasters starting their own hyperlocal initiatives. Fisher Communications, for example, launched its hyperlocal drive last August with 43 Web sites targeting Seattle neighborhoods. It more recently invested $1.5 million in DataSphere, the company that helped launch the initiative that now comprises more than 100 sites.

Analysts are hot on local media as well. The folks at BIA/Kelsey see it as a $140 billion business enhanced by geo-targeted advertising this year. A recently published Pew study, however, questions the revenue source for local information. (See “Funding for Newsgathering Dries Up.”)

AOL also said today it’s relaunching its City’s Best platforms in 25 cities throughout the year, “and add high-quality, city-specific content to its ‘best of’ entertainment options for each of these metro audiences.”

The VC fund, which AOL calls “one of the first such initiatives of its kind,” will target local Web initiatives. It will be operated out of AOL Ventures.

“AOL is investing meaningfully in our communities through trusted, professional journalism and location-specific content in a compelling way that is valued by our users and attractive to our advertisers,” said AOL Chairman and CEO Tim Armstrong. “Local is the one area of the Internet that has not been built out in an extensive way. While there are companies in the local space, AOL has the technology to digitize the local space at scale. We believe it’s an untapped market for the most part and one of the largest commercial opportunities online that has yet to be won.”

AOL will also up the local content on, through intuitive geo-targeting technology, later this year.

In addition, AOL intends to increasingly incorporate local content on the homepage, using intuitive geo-targeting technology to tailor information across a range of interests to the user’s location later this year. -- Deborah D. McAdams

(Image by Marc Buehler)