Back in 2007, newspapers were dying, and Patch was supposed to be a solution. But this week, AOL’s hyper-local online news organization is planning to shut down hundreds of Patch websites and lay off staff.

This is how it was supposed to work: Give every community its own website — or Patch — run by a dedicated, digital reporter, and pay for it with targeted ads.

But, says Ken Doctor, media analyst at Newsonomics, “It costs a lot of money to do local news gathering and the return in advertising is small.” Patch is losing money for AOL. “So investors would like to see Patch gone,” he adds

Ben Schachter, an Internet analyst at Macquarie Securities, disagrees. “I think the reality is we would like to see it become profitable,” he says.

Patch has more than 900 websites. And he says investors are glad AOL is reportedly shutting down or handing off several hundred of the least profitable Patches.

“There are Patches that are doing well,” he notes. “And I think they’re going to actually invest in those businesses and really make them build out to scale.”

AOL CEO Tim Armstrong has pledged to make Patch profitable by the end of the year.