Exclusive: AOL to Lay Off 10 Percent of Staff, Cutting 700, Due to Ad Meltdown and a Refocusing on New Structure
by Kara Swisher
Posted on January 28, 2009 at 10:18 AM PT
Time Warner online unit AOL is cutting 700 employees due to the weak economy and the ensuing falloff in advertising revenue, but also because of recent structural changes made to refocus the once-mighty service.
AOL CEO Randy Falco sent a memo this afternoon to AOL staff about the layoffs and other cost cuts being made, confirming the moves.
The 10 percent reduction in workforce will take place over the next several quarters, with most of the U.S. layoffs to be completed by March. AOL has 7,000 employees world-wide, mostly located domestically.
AOL is also eliminating merit raises, just as Yahoo (YHOO) and other digital companies have done recently, and consolidating facilities.
While Time Warner (TWX) has been trying to sell AOL to Yahoo, the online unit has also been shifting its resources, as part of a long-term turnaround plan. It has focused the company on three parts: its Platform-A ad unit; its communications and social-networking arm, People Networks; and its recently launched MediaGlow content studio.
It has also been in the midst of splitting out its longtime access business, which has provided the bulk of AOL’s revenues and profits, which sources said has given its top execs insight into what its future business model should be.
Besides the layoffs and cost cuts, sources said AOL was also looking at paring its international business, which has never been particularly successful.
As part of its ongoing moves to make New York its main HQ, AOL will also be consolidating facilities in Silicon Valley, Los Angeles and at its original homestead in Dulles, Va., although not closing it completely.
Much as throughout the online advertising industry, AOL has seen drastic declines in growth. In a recent financial report, AOL said its ad business dropped almost 20 percent year over year.
And AOL’s worth has also declined, with Google (GOOG) recently writing down its 2005 investment of $1 billion in the online service, which valued it then at $20 billion. It is now valued at $5.5 billion.
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Comments
Me thinks that TWX is trying to be proactive with the AOL layoffs before they miss their numbers next week in the qtrly earnings report.
TWX never fails to disappoint on the qtrly numbers.
Posted by Jack Daggitt at January 28th, 2009 at 12:42 pmif craigslist can be run on 20 people why does it take 7,000 to run a top 20 site like aol?
craigslist is above aol in users
Posted by Sam Harrison at January 28th, 2009 at 12:47 pmCraigslist is far below AOL in terms of total users and breadth of products. That is some of the reason they have a much larger staff. Whether all 7,000 are necessary to run their business is a different discussion.
Posted by kelly amsbry at January 28th, 2009 at 1:28 pmYou’ve got mail! I loved that movie.
Posted by Mark Omega at January 28th, 2009 at 1:53 pmCurious sentence about the access business giving AOL’s top execs “insight into what its future business model should be.” What insight is that, and have they learned enough to shed the aging sugar daddy?
Posted by Kawika Holbrook at January 28th, 2009 at 9:01 pmComment #1 is the voice of God, people. Listen up. (Seriously. god@aol.com.)
Posted by Jay Levitt at March 10th, 2009 at 2:39 pm