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.

Other changes: Goodbye to raises and a hello to a consolidation of AOL’s facilities.

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Yesterday, TechCrunch’s U.K. blogger Mike Butcher spun the tale of buyer’s remorse run amok with a report that Time Warner online unit AOL was “seriously considering selling Bebo, the social network it acquired for $850 million only a year ago,” citing poor performance and a bad advertising market.

Later, AOL went on the record saying “there is no truth to this rumor,” although Butcher insisted otherwise from his sources.

Well, actually, no. While Time Warner was crazy to pay that much for Bebo, it is not quite that nuts to sell it for bupkis.

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Although its advertising business is tanking this quarter and its merger deal with Yahoo remains dormant, AOL is focusing on one of the brighter spots in its business: the popularity of its content sites.

Today, the Time Warner unit will announce the expansion of its publishing unit, which it is curiously called MediaGlow.

In a press release obtained by Boomtown, AOL said it would develop over 30 new sites in 2009, employing its low-cost, niche-focused model that has worked well at many of its 75 existing sites.

But is a deep dive into content a risk in the midst of an advertising downturn?

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So–at this point–BoomTown feels it is not untoward in asking: What the heck is taking so long for Yahoo and AOL to decide whether or not to merge their struggling operations?

And, after talking to a dozen sources, inside and outside both companies, this week, I can tell you there is definitely one nagging problem: They’re just not that into each other.

Make no mistake, though, these arranged marriage negotiations are grudgingly advanced. Oh, they are talking, and how, now engaged in what another source describes as “very serious due diligence.”

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As has been copiously reported here and all over, Yahoo and AOL have been engaged in never-ending talks about a possible deal to merge their flagging Internet businesses.

Now, sources tell me, the circle of executives at both companies interfacing with each other has been widened, for purposes of due diligence.

That includes Yahoo CEO Jerry Yang, who is in New York this week–where AOL parent, Time Warner, is located–to meet once again with its CEO, Jeff Bewkes, to see if they can actually complete the merger.

Now, all this frantic activity does not mean a deal will necessarily be struck.

But it is just this kind of ramped-up blabbery that has many at both companies predicting that a deal will go through, sooner or later, as soon as Time Warner and Yahoo can agree on a price.

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Valleywag got a hold of a sticker (see below) that Bebo employees are passing around in anticipation of the close of the purchase of the third-ranked social-networking site by AOL for $850 million in cash.
The motto: “I, for one, welcome our new AOL overlords.”
Why shouldn’t they? As BoomTown reported, every Bebo employee has had their [...]

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AOL is turning into the Oprah Winfrey of the digital world, it seems, opening up Time Warner’s (TWX) checkbook to as many start-ups as it can.

Last month, it was $850 million in cash for social-networking site Bebo.
And, today, it’s a much smaller slug for Sphere, which started as a blog search engine and morphed into [...]

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OK, we Photoshopped it, but only because we could not get our head around what the official Yahoo/Microsoft post-merger picture might look like.

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After its AOL division paid out an insane $850 million for social networking site Bebo yesterday, one had to wonder if the true digital legacy of Time Warner will be as the perpetual gravy train for legions of Web players.

It certainly seems that way from the original AOL execs who “merged” their company with Time Warner in 2000 and cashed out at the peak right after the deal to the series of ad networking startup entrepreneurs who got acquired, took their payouts and skidaddled right on through to the two founders of Bebo–Michael and Xochi Birch–who didn’t even stay long enough for a latte after grabbing their chunk of the payday Time Warner was handing out in crisp bank notes for the social networking site they founded.

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What’s AOL getting for its $850 million in cash to purchase of social networking site, Bebo?

A very attractive social networking service and a very experienced exec who has been running it.

But, perhaps more importantly for those who focus on pesky numbers, not a whole lot of revenue and negligible profits, judging financial information I got a gander at, courtesy of sources at several companies that looked at funding or buying Bebo.

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Yesterday, Facebook Founder and CEO Mark Zuckerberg posted a major mea culpa blog post about the controversy around its Beacon ad product, which can track your purchases on some external sites and send the information back to your profile’s news feed.

As usual, BoomTown asked for the obligatory on-the-record interview with Zuckerberg, but he still has not invited us over to get social at his social networking HQ in Palo Alto, Calif. So while we’re waiting by the phone, we need to get busy.

Thus, we continue our thankless quest to decode all memos from Internet moguls (BoomTown speaks fluent Web 2.0 double talk).

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Yesterday, BoomTown broke the official news that 2,000 employees (out of 10,000 worldwide) would be made redundant at AOL. Sure, we’ve asked for the obligatory on-the-record interview with CEO Randy Falco, who made the announcement of the layoffs. But while we’re waiting by the phone, we need to get busy.

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More to come on this story, but AOL will lay off 2,000 employees. Here is the letter to AOL employees that went out at 11 a.m. EDT today from CEO Randy Falco:
Dear AOL colleague,
Just over a year ago, AOL embarked on an incredibly complex and significant transformation as we fundamentally shifted our business model from [...]

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AOL=Ads Online Loser?
What can we say about AOL’s ad miss, reported in the New York Times today by Miguel Helft, except to quote an email I got from a former AOL executive today: “Ad sales and no surprises were the reason these guys were supposedly brought in.”
Oops. Indeed, more analysis of this issue tomorrow, but [...]

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Finally, oh finally, the day has come when AOL has officially stopped manhandling its customers.
Again! But it actually might be the very last time we have to kiss and make up with the once mighty online service.

Could it be that unicorns will be appearing next?
Yesterday, AOL–about which I know a book or two–settled another [...]

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