AOL will cut its work force by 10 percent today, laying off approximately 700 employees, as a result of the struggling economy and a decrease in advertising revenue, we’ve confirmed with the company. AOL has 7,000 employees worldwide. The cuts have been added to our Layoff Tracker.
In a company wide memo (reproduced below), AOL CEO Randy Falco said the layoffs will be rolled out over the next few quarters and U.S. workforce reductions would be completed by March. He added that the company will eliminate merit pay increases in 2009.
While AOL may be considering a sale of Bebo, for now it is still the centerpiece of its People Networks business. Last July, TechCrunch reported that AOL reorganized its products group, including Xdrive, AOL Pictures, Bluestring and MyMobile, to shift focus and resources on other products including Bebo, MediaGlow and ad unit Platform A. The company also dismantled and reorganized its product management earlier this year; following the departure of Kevin Conroy.
The layoffs follow on the heels of Google’s write down of $726 million of its $1 billion investment in AOL, suggesting AOL’s total value is now $5.5 billion, compared to $20 billion at the time of Google’s 2005 investment in AOL.
Here’s the memo that Falco sent to AOL employees regarding the layoffs:
Dear AOL colleagues,
I’m writing to tell you about some important decisions we’ve made about AOL’s business and why we’ve made them.
The deepening economic recession has affected every corner of the economy, including our own. Online marketers have tightened their ad buying across the board, reducing their spend by hundreds of millions of dollars.
As a result, we will be reviewing our entire organization to further align resources and expenses against the real revenue opportunities in this difficult market. Part of this will involve consolidating groups to gain efficiencies that will unfortunately lead to head-count reductions. We anticipate this will result in a net reduction of our workforce of up to 10% over the next several quarters – and we will attempt to finalize all domestic actions by the end of March. Reducing our workforce is never easy, particularly in the current climate, but our goal in doing this is to provide our core businesses the resources they need to thrive. Please know that, as always, we’ll be doing everything we can to help and support those affected, including offering severance packages and other services.
To further keep employment costs down, we will also forgo merit pay increases in 2009. This is a painful decision, but one that many companies have prudently taken to help minimize the number of layoffs they have to make.
To provide some perspective on these decisions, right now we’re two years into a three-year turnaround plan. Since day one, our strategy has focused on building and growing mutually dependent publishing, advertising and social media businesses to take advantage of the shifting media landscape. We’ve worked shoulder-to-shoulder to make considerable progress during this time.
We acquired best-in-class companies across the digital advertising space (ADTECH, Third Screen Media, Lightningcast, buy.at, TACODA and Quigo) and integrated them with Advertising.com to build Platform-A, the largest, smartest display advertising platform in the world.
We grew our MediaGlow audience via an efficient content development model that in 2008 enabled us to launch more than 20 new sites that are generating significant page view (up 64% year over year in December), engagement (up 39% year over year) and unduplicated user (70+ million) numbers. This momentum will continue in 2009 with our goal of creating an additional 30+ editorially curated sites focused on consumer passion points.
We combined Bebo with our longtime community assets AIM and ICQ as well as newer acquisitions Goowy, Yedda and SocialThing, to build People Networks, gaining AOL a foothold in the critical social media space, with more announcements to come on the next phase of development in both the social media space and in the integration of social and publishing capabilities.
This progress continues to put AOL in a strong position to capitalize on our new business model when the recession ends.
In addition to focusing our investments, a successful turnaround plan also requires us to realign our cost structure against this three-pronged business model – making difficult decisions to cut costs in areas that aren’t critical to our growth. Splitting out the Access business improved the transparency of what’s working and what’s not, and allowed us to make better decisions about exiting businesses that weren’t performing while investing in growth areas. A successful turnaround plan also mandates we control costs, operate with healthy margins and position the company for sustainable growth. As you know, we’ve moved repeatedly to bring discretionary expenses in line to spare across-the-board job cuts.
But we’ve also had to make many hard decisions along the way. And this moment is no exception. We’re at a pivotal point in AOL’s transformation, and need to be even more strategically focused and operationally efficient as we weather the economic storm.
In addition to the head-count reductions and the 2009 merit pay decision, we are also making changes throughout the organization to improve efficiency and better align it to our three core businesses. This includes a review of our international operations and our global shared-services functions. In addition, we will continue throughout the year to carefully and thoroughly review all our products and services to make sure every one fully supports our strategy and has the potential for growth.
Finally, we are going to realize significant savings by continuing to consolidate our facilities – for example, moving from two buildings to one in Mountain View, from two floors to one in Los Angeles, and leasing unused space on our Dulles campus.
With these and other changes, we will take significant annual run-rate costs out of our business while, importantly, retaining the flexibility to invest in our growth strategy.
I know all this will raise questions, but I wanted to share as much as I could with you now. Senior management will provide more details as appropriate to their teams in the weeks ahead.
As difficult as things look right now, the economy eventually will turn around. Some companies will use this time prudently and make difficult decisions to come out of it in better shape – growing toward areas of opportunity, scaling back in others and maintaining a line on costs all around. Our only choice is to be one of these companies. With your continued hard work and dedication, we will position ourselves to emerge a stronger company ready to lead in a vibrant online market.
Randy
With all these companies getting rid of talent we’re going to see some amazing startups form in 2009.
I am not so sure. Back in the last tech bust, the new mantras were B2B and B2C … Back to banking and back to consulting.
Unfortunately, B2B is probably out of the question these days, so it most likely definitely B2C, back to consulting or back to college.
Amen to that Charles, amen.
You can’t keep a strong dog down for long, and California definitely has a lot of strong dogs and go getters, amongst other great States of course!
A lot of great start-ups got their break when they had the opportunity to hire world class staff onto thier team.
cooljobsalways
http://tinyurl.com/7uj5ay
well someone has got to pay for bebo
it was only a matter of time
I layed off 20% of myself today.
I’m now, both lean and a bit lopsided.
But don’t worry! I’ll bounce back in 2222 (it’s ordained).
We acquired best-in-class companies…
Yeah and you keep on doing that and ruining them. What is it with AOL management? Are they incompetent before working there or does the place breed it?
What is it with AOL management? Are they incompetent before working there or does the place breed it?
Well the fully loaded salary of 700 employees for the next 15 years …
or a second class social network populated by British 13 year old who will never generate signifcant revenue?
If you had 800 million, what would you spend it on?
Are they incompetent before working there or does the place breed it?
yes to both
I love how these companies continue to ‘eliminate merit bonuses’. First M$, now AOL.
Good work, morons. So what you’re telling everyone is “bust ass, help pull us out of this and you’ll get… nothing extra”.
Trim expenses in a lot of other ways, including getting rid of the dead wood shlock who is a lot more interested in office politics than in getting real work done, but leave the damn incentive programs in place.
Of course, their mentality is that you’ll do that anyway since you want to keep your job in this economy, but you know eventually things turn around… and people don’t have short memories. They’ll remember how you treated them.
Google’s recently made some bone-headed manuevers (’phones that no one wants for Xmas, anyone?’), but at least they’re leaving their merit pay bonuses intact, if not actually improving them a bit. Guess they don’t want *all* of their talent walking out the door when things improve.
- Bill
Companies across the board are cutting back on everything, bonus programs should be the first thing to go in this economy. I mean, if you are working at a company that you are not willing to put 100% in all the time, regardless of the bonus prospects, what are you doing at that company? Bonuses should not be expected, otherwise they would be included in salary.
Follow on smartbabesaresexy comments
AOL LLC VP earned $200K base salary in 2007
http://www.sala...-id-1720460.htm
That is more than double the average AOL pay of $82K
http://www.sala...-at-aol-llc.htm
And higher that Facebook equivalent position (VP) salary of $174K
http://www.sala...-id-1744406.htm
Not surprisingly, I am wondering why they don’t cut the management pay or layoff those incapable managers.
This shocks someone? AOL has been slowly drowing for awhile now.
Only 7,000 employees! Damn, thats not exactly what you would call a large global company. I’m sure I have worked for companies that have more than that in their main office. I guess AOL were never as big as you’d think a coaster company should be then.
Also 1-10, well if that was a killer disease wouldn’t it called a slate wiper, a total harbinger of death and doom?
7000 seems like a bunch of people to me, especially for a company that does not do any manufacturing/retail.
Saw this one coming. AOL had its peak years ago.
Wow, that must be the entire Indian call center
I was wondering about NetZero the other day, they had a commercial on TV and I was shocked that anyone still aggressively sells dialup access. I mean to say, they have to know their position in the industry is finite?
They sold the call center about 2 years back if I am not wrong.
It might be finite, but that argument could be made for all technology companies. This industry moves so fast that the cutting edge is old news every six months. Not only that, a huge portion of the population in the Midwest is still on dial up.
well someone has got to pay for bebo
GigaOM has the best graphic illustrating the AOL layoffs. The iconic AOL man logo carrying his layoff box: http://gigaom.c...ure-is-content/
AOL is not that better
Approximately 1300 more AOL employees to again be let go – announced week of 20th July 2009.
AOL: More Layoffs Inevitable
Monday, July 13th, 2009
Next week, CEO Tim Armstrong will announce plans for the company to focus on four businesses — content publishing, ad network, local, and communications.
According to an article in Silicon Alley Insider, AOL probably needs about 5,000 instead of 7,000 employees.