AOL is also ousting Patch's top executive Steven Kalin as it either closed down or finds partners to replace 400 out of 900 sites that it operates, the Journal reported Saturday.
Patch is an ambitious attempt to use one company to report online news about local governments, schools and neighborhoods, including reviews for local restaurants, the Journal said.
But AOL Chief Executive Officer Tim Armstrong said Patch would be profitable by the end of the year and he is cutting expenses to make that happen, the Journal reported.
Armstrong said this week that the company could lay off up to 500 of its 1,100 staff members.
Armstrong co-founded Patch in 2007. AOL purchased it in 2009.
AOL declined to comment on the layoffs.
"The model essentially hasn't worked ... unless perhaps you gave it a 10-year run. And no one has been able to stay the course to give it a 10-year run," said industry analyst Ken Doctor at Outsell referring to attempts to make local news generate enough revenue to make a go of it online.