Mann said media companies seeking to outsource part of their news-gathering operations in order to produce hyperlocal content "is the entirely wrong approach."
"It all comes down to this: You're trying to build a community on your site, and you cannot do that unless you're in the community," he said.
But even sites that invest in a local reporter, like Patch, are finding that drawing readers doesn't directly translate into financial success.
"Is there a way to do this right? I don't know. Patch is still fighting the good fight, but it's not looking good," Mann said.
Starboard Value LP, an investment firm that owns just north of 5 percent of Patch parent AOL, published in May a withering critique of the company's management amid its fight for seats on the AOL board of directors.
In a nearly 100-page report, the investors took aim at Patch, which it estimated lost $147 million in 2011, while generating just $13 million in ad revenue.
"We do not believe Patch is a viable business," the report said.
AOL, which does not break out finances by business unit in financial reporting, would not comment on the figures used by Starboard.
The combined Patch websites got nearly 12 million unique visitors in May, according to comScore, making the month its best ever in traffic and revenue.
Warren Webster, one of the company's three co-founders, said Patch is on track to generate between $40 million and $50 million in revenue this year, which equates to between roughly $46,000 and $58,000 per site. He said Patch is expected to be profitable on a run-rate basis by the fourth quarter of 2013.
"It's an incredible success story. If you look at our trajectory from day one to now and put us up against any other significant media startup, our timeline is great," Webster said. "I couldn't be happier with where we are today. We are very, very confident in the direction that we're going."
Patch plans to continue targeted expansions in the months and years ahead, but not at the rate it did in 2010 and 2011, Webster said.
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In the Chicago area, where Patch has about 75 employees, the company is seeking to open two new Patches soon in Chicago's Mount Greenwood and Beverly neighborhoods.
It will soon have competition.
In Chicago, Joe Ricketts, the billionaire founder of TD Ameritrade, plans to bring his community journalism startup, DNAInfo.com, to the city sometime this fall after spending two years honing its model in New York City.
While the company's editorial director and publisher, Leela de Kretser, would not say whether the private enterprise has turned a profit, she said its readership and advertising base has steadily increased.
DNAInfo, which has about 40 employees, including reporters scattered throughout Manhattan, said it generates about 1 million unique visitors a month.
"If we stick to our current business plan, we're going to be nicely profitable," she said.
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Zohar Yardeni, the chief executive of another hyperlocal startup called The Daily Voice, operates about 50 websites in New York, Connecticut and Massachusetts.
While the enterprise has yet to break even, Yardeni said the company is "confident that local news survives. The real questions we're out there trying to answer is: What is the business model that supports that? We think we're on a path to figuring it out."
Despite the confidence of the startups, Patch's Webster acknowledged that there is no proven business model in publishing hyperlocal content.
When asked why so many traditional media companies have tried and failed in the hyperlocal market, Webster said none of them have dedicated the appropriate amount of time, effort and money to see the ventures through.
"I wouldn't say they're failing; I'd say they're bailing," he said.
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