AOL to Lay Off One in Five

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http://bits.blogs.nytimes.com/2007/10/15/aol-to-lay-off-20-percent-of-its-workers/index.html?hp

Randy Falco, the chief executive of AOL, announced in an internal memo on Monday that the company would eliminate 2,000 of its 10,000 jobs over the next few months. Word of the layoffs has been kicking around for months. Mr.Falco, a former top NBC executive, is trying to streamline AOL¹s executive ranks. AOL has had a series of layoffs over the last few years, although these mainly have centered on customer service and operational employees.

"Painful" is how one AOL exec described the mood in an instant message to me today.

AOL has been struggling to find a new business to replace its rapidly declining Internet access service. It has tried to build AOL.com into a portal to take on Yahoo. That has allowed it to keep a hold on some defecting AOL members who want to continue to use AOL for e-mail and perhaps other services.

To make up for the loss, Mr. Falco has been buying companies in the advertising business like Tacoda to supplement AOL¹s Advertising.com unit.

We'll report more later. If you are at AOL, let us know what is happening and what you think about it by sending an e-mail to bitstips@nytimes.com.

Mr. Falco¹s e-mail to the staff is below.

""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 a subscription-based ISP to an advertising-supported Web company.

Today, I want to give you an update on where we are in this transition, and talk about further actions we¹re taking and where we¹re headed as a company.

When I came to AOL, I knew we had to take several steps to complete our company¹s transformation.

We aggressively expanded our advertising capabilities, building on the strength of Advertising.com and our premium ad sales force. We acquired three leading-edge advertising companies ­ ADTECH, Third Screen Media and TACODA ­ and formed Platform-A. AOL now has one of the largest and most sophisticated ad networks in the world, and we¹re well positioned to compete where the ad market is heading.

We rebuilt and revitalized our key products, programming channels and platforms. And unique visitors to AOL.com, News, Food, Money & Finance, TMZ, Moviefone, MapQuest and many other sites are up. Our products are once again creating buzz in the market. And to reach the widest audience possible across the Web, we're unbundling our products and programming so users can take them along wherever they go online.

Importantly, we're taking the business global. We¹re extending AOL's reach into seven new countries this year while globalizing our product development efforts. By the end of next year, AOL will have a presence in 30 countries. That's a remarkable achievement in a relatively short period of time.

We refocused the business around three core areas ­ Platform-A, Publishing and Access ­ and are now managing these as three distinct but related components.

Here's why this is important. With Platform-A, we can offer advertisers the  most advanced set of solutions across our extensive network of owned-and-operated sites and third-party sites. Publishing provides us the products, programming and platforms we need to sustain a healthy owned-and-operated network. And our Access business continues to be profitable, providing us cash flow to invest in other areas of the business, and it¹s an important source of primary e-mails and page views.

The last important piece in this transition is the realignment of our costs against these three businesses so we can operate as efficiently and effectively as possible. This is in many ways the most difficult step, but a necessary one.

As a part of this realignment, tomorrow we begin a reduction in force that will, over the next couple of months, affect a total of about 2,000 people out of our worldwide workforce of 10,000.

Everyone impacted by this reduction deserves our thanks and respect for their contributions to the company. We will aid these individuals in their transition to new opportunities as much as possible, most importantly with what we believe are generous severance packages.

This realignment will allow us to increase investment in high-growth areas of the company ­ as an example, we added hundreds of people this year through acquisitions ­ while scaling back in areas with less growth potential or those that aren¹t core to our business, as we did with the sale of Tegic. So where is this taking AOL? Put simply, my vision for AOL is to build the largest and most sophisticated global advertising network while we grow the size and engagement of our worldwide audience.

We¹re only a year and a month into our transformation, and the turnaround has been dramatic. We¹re now in a position to win as an advertising-supported business. We have a bright future as a company if we can execute on this vision.

Randy""

***FS***  It feels like they're coming to the realization that development isn't all that it's cracked up to be and that they can do just as much or more with less people and more simplistic monetization.  These guys and companies like them should be buying large domain portfolios or other media assets which can deliver larger numbers of organic traffic without large numbers of people.  Perhaps a network of bloggers..  Buy Perez Hilton's blog or the less developed equivalent and give him an earn out.

Comments

[Alex]

well if i was working in AOL's corporate development unit I would acquire Marchex very quickly. Not only would you be acquiring, top domain portfolio, local content, but you would also acquire a company that is driving millions of monthly visitors as well as a expertise in the space.
Here's the chance for AOL to take a huge charge off on their financials (with layoffs) but also use this perceived bad news to buy the future of the internet.imo

I also have other ideas for AOL but maybe I should first be approached about a consulting gig in their corp dev strategy group:)

***FS*** So would I.. Marchex is an undervalued acquisition target.

[Danno]

What ever happen to AOL's plans for aim.com?

At one time about 2 years ago when they were losing millions of dial up customers, they came up with big plans for aim.com

I see its kind of a social network looking site now.

Dan

[owen frager]

they could start by acquiring wallstreet.com
replacing bloggingstocks.aol.xxxx with it

Forget the traffic and the business models.

Those are a bonus... lets talk BRAND... image

They have traffic coming to check their stocks and banking their futures on these eballs. Of course people are leaving FREE aol in droves, but wouldn't the same defectors pay for email with the vanity domain wallstreet.com?

It's the financial capital of the world. It makes a big difference in perception when a firm has a Wall Street address.

Like having a 212 phone number- puts you in a different league.

Now they all can. At least in email or on a directory.

It's business.com but to the more elite crowd. The Forbes crowd, the one crowd that is growing in print and responding to high-ticket ads.

Talk about an old economy old boys club. The ultimate seniors social network for those who don't relate to what's available now.

What about everyone glued to CNBC and the tickers and the Yahoo portfolios that all the corporate cubicles are focused on. Here is the financial portal to end all portals.

Do you realize how much Traffic is created and ads are sold because millions of 80s Wall Street types who can’t type have become addicted to checking their free easy-to-use portfolio tools on AOL and Yahoo Finance. Wouldn't they rather log into to Wall Street! Get better portfolio management tools and expert advice from the Time Warner talking heads they know and trust from TV?

I don't know of a single banker or broker who wouldn't want that on their business card. Myspace for grown ups.

Oops… this isn’t the wallstreet.com thread or isn’t everything web about wallstreet.com?

Right now AOL is a street with no name.

[Bob]

AOL needs to get focused and get back into the game, sell off all properties like dmoz.org and others.

[Danno]

Time Warner needs to spin it off into its own company. Aol has been killing TW's bottom line for a long time. How much did they pay for AOL...back in the day?

Dan

[Chris Ward]

It was only a few years ago that I was up at the executive offices at AOL in Dulles, Virginia for a "high level" business meeting with AOL and Time Warner.

It was kind of a creepy experience. The AOL campus was lifeless. Where were the people? Where was the vibe that I was so used to feeling and seeing in Silicon Valley?

It just wasn't there.

I'm glad to see that AOL is still fighting for survival. There are some great people there.

[Ari Shohat]

Hi there,

AOL's development in many instances is simply a joke. Yes if that's what they call development, they are better off getting a portfolio. But too many units there just sit on their hands and don't give development a decent chance.

For example look at Shoutcast.com - they had that as one of the most popular streaming directory destinations since like 1998. It's still one of the biggest sites overall on the net. Yet they barely have done anything to it, and just watched companies like Last.fm take the lead. They could have also built up a system for audio advertising years ago, yet they've not done anything like that. Management kept rotating, things were passed around like a hot potato. That's not development of assets. And you know what, if that's the way they would manage a portfolio too, what's the use. AOL needs to seriously rethink and redo itself from the ground up - the insides are rotten there.