The online-time Internet service provider turned online content contender, is bulking up to take its Patch hyperlocal news operation nationwide.

After two-plus years of stories about media company layoffs and the end of the journalism business as we know it, isn’t news of one comany’s hiring spree uplifting?

Yes, and no.

This week AOL announced that it’s got Patch bureaus up and running in 100 neighborhoods, each one staffed by a full-time reporter/editor, helped in part by contributions from local freelancers. AOL also says it anticipates hiring another 400 Patch journos in coming weeks to expand to a total of 500 locations in 20 states by the end of 2010.

Depending on which news account you read, Patch editors make $37,000 to $40,000 a year, not bad for what is the equivalent of a editorial job at a community newspaper.

Or is it?

According to accounts that are starting to trickle into the blogosphere from journos who’ve worked at Patch, the hours are long and the pressure to produce grueling, making the pay not so great after all. And that’s the bad news.

One writer, Ed Pilolla, is this week writing a series of posts about his Patch experience, starting with why he took the job, his take on the pay and how many stories he was expected to produce a day. Pilolla, who apparently doesn’t work for Patch any more (and coincidentally took part in this year’s WordCount Blogathon), says he routinely put in 75 hours a week, which meant that his annual salary worked out to be something like $10 an hour.

AOL CEO Tim Armstrong is set on dominating the hyperlocal news niche, according to this Bloomberg Businessweek article, hoping to grab local advertising dollars away from home-town papers, geographically-focused content farms such as Examiner.com and mom-and-pop hyperlocal sites.

According to the Bloomberg Businessweek story, AOL is pouring $50 million into the venture. Fifty million dollars sounds like a lot of money, especially if it’s meant to cover more than a year – and most media startups don’t break even in the first year, or even the second. That amount breaks down to $100,000 per location, so if it is meant to cover two years, that’s $74,000 to $80,000 to cover the editor’s salary with the remainder going to pay freelance writers and photographers.

But AOL has also hired an EIC, four editorial directors and 52 regional editors, so that $50 million is even more thinly stretched.

According to an Aug. 17 AdAge story, Patch is paying freelancers an average of $50 a story. That’s more than what content farms like Demand Media or Associated Content pay, according to AdAge’s Edmund Lee. But, unlike those companies, “the amount of available work is limited,” he writes. “Most of Patch’s editors have a weekly freelance budget slightly north of $500, according to people familiar with the matter. Patch further differs from other content purveyors by only taking on writers with a background in journalism.”

So if you’re looking for work, either full time or freelance, is Patch worth considering?

Yes and no.

If you’ve just graduated from j-school, have been out of work or are looking for an opportunity to become a better editor and reporter or how to run a hyperlocal site, a Patch assignment might be just what you’re looking for. You’ll work with experienced editors – which is always a good thing – and for a company that’s far from a startup.

But, as Pilolla points out, 65+ hour work weeks can be exciting at first but quickly become a grind. And working so many hours leaves little time for moonlighting to make up for the crummy pay.

What do you think – would you work for Patch?

You’ll have to subscribe to the paper in print or online or borrow a copy from a friend to see AOL to Produce News, Video by the Numbers in its entirety. But here are some of the relevant details:

• AOL will rely on a new digital newsroom system that uses computer algorithms to predict what types of stories, videos or photos will be popular, then assign articles accordingly.
• Here’s where freelancers come in. Stories will be assigned to freelancers via a new Web site called Seed.com. According to the story, AOL already works with a network of 3,000 freelancers but is looking to increase that number through Seed.com, “which is open to anyone looking to submit a story.” In other words, not necessarily professional writers. Note: The Seed.com website isn’t much to look at just yet, but they will take your email address and promise to get back to you after they launch, if you’re so inclined.
• Under the new system, AOL’s freelance fees will range from nothing up front and a share of ad revenue to more than $100 per story.
• According to the WSJ story, AOL will offer advertisers “the chance to work with its editorial team to create custom content.” In other words custom publishing. While there’s nothing wrong with that, it’s not exactly journalism, and hopefully won’t be labeled as such.

The WSJ story used the recent baby crib recall as an example of how AOL’s new system would work. If the new system had been up and running, according to the article, the company’s number-crunching wizardry would have determined that people were interested in seeing more stories on the subject, which would have prompted editors to assign more stories.

To which I can only say: no duh. Any editor worth their salt would have come to the same conclusion, and wouldn’t have needed a lot of computer algorithms to do it.

All this is being directed by Tim Armstrong, the former Google advertising exec who’s slated to take over as AOL’s CEO when Time Warner completes spinning off the Internet company in December.

Some of my freelance friends are already up in arms over the whole situation. They’re ready to put AOL into the same group as Demand Studios, Associated Content, Helium, Studio101 and other sites that I’ve called content aggregators but other freelancers have dubbed content mills for the paltry amounts they pay, whether to professional writers or hobbyists, to churn out how-tos and other articles based on topics that are more prized for how high they’ll turn up in keyword searches than for their reportage.

But other freelancers I know who work on AOL’s blogs and other news enterprises have nothing but good things to say about the working conditions, including friendly editors and decent money.

For now, it remains to be seen whether AOL’s new endeavor will turn out to be a legitimate new market for freelance work, or give new meaning to the term bad seed.

Whatever happens, it’s also worth noting that AOL is the latest in a string of companies that most people would identify as technology ventures getting into the media business, a growing list that includes Google, Microsoft and Yahoo. As newspapers continue to struggle, are these tech giants the real future of the news?