As Part of Transition, AOL to Shed 2,000 Jobs

Advertising, Publishing Among the Units Under Scrutiny

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NEW YORK (AdAge.com) -- AOL is cutting 2,000 employees from across the company's various divisions, and this time advertising is not necessarily immune -- or so the company says.
Randy Falco
Randy Falco Credit: Keith Bedford

In a letter to employees that explains AOL's new focus, CEO Randy Falco spent nine paragraphs detailing how the company had embarked on a "very difficult transition" and how AOL was refocusing on three specific areas -- advertising platform, publishing and access.

The 10th paragraph
In the 10th paragraph he got to the part everyone had expected (thanks a rumor mill that had been swirling for days):

"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," he wrote in the memo, which was obtained by AdAge.com.

An AOL spokeswoman would not specify in which of the company's divisions the layoffs would occur. "We're looking to make some reductions and bring the workforce in line with our business plan across the board," she said when pressed whether ad sales would be affected.

But the idea that AOL would reduce its ad-sales staff at a time when it has placed more emphasis on the online-advertising sector is surprising. It's a stark change from the last major round of layoffs, in late 2006, which focused mostly on its dial-up operations and call-center employees.

Previous layoffs
In summer 2006, AOL announced it would shed its walled-garden subscription approach to a portal business in favor of an open and free ad-supported model. By August, it was shedding 5,000 employees as a result of that new model. Late in the year, there was a round of executive layoffs that included CEO Jon Miller, who was replaced by Mr. Falco, a former NBC Universal veteran. Mr. Falco's arrival was followed by a reorganization that saw the departure of several other executives, including programming chief Jim Bankoff.

Last month AOL reorganized again, announcing it would move its headquarters to New York and launch a division called Platform A, which would house all of its ad-sales organizations, including AOL, Advertising.com and new acquisitions Tacoda and Third Screen Media.

Platform A is headed by Tacoda CEO Curt Viebranz. In addition to Platform A, AOL's business will be concentrated in two other areas, Mr. Falco's memo said: programming and access. The majority of AOL's employees fall into the Platform A and programming divisions as those are the growth areas, said a spokeswoman who wouldn't specify how many AOL employees belong to the various divisions.
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