NEW YORK — AOL is eliminating another 2,000 jobs worldwide as
it tries to cut costs and make room to grow in online advertising.
The
20 percent slice from AOL's work force comes after several rounds of
layoffs in recent years, including a cut of 5,000 jobs last fall. The
latest cuts would give AOL more flexibility to expand ad-related
businesses through acquisitions and potentially new hires, company
officials said.
"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 aren't core to our business,"
AOL Chief Executive Randy Falco told employees Monday.
AOL
believes it is now best at developing Web sites such as its Moviefone
and MapQuest properties to attract people in some 30 countries, Falco
said. Its goal, he said, is to build "the largest and most
sophisticated global advertising network" for marketers to reach that
online audience.
AOL, once the leading seller of Internet access
subscriptions, has struggled in recent years as Internet users have
ditched their AOL accounts for high-speed services offered by cable and
telephone companies.
To make up for declines in subscription
revenues, the company has been trying to boost traffic to its
ad-supported Web sites and last year began giving away AOL.com e-mail
accounts, software and other features once reserved for paying
subscribers.
Last year's job reductions were mostly in
customer-service and marketing personnel as AOL opted to stop producing
and distributing its notorious trial discs aimed at luring new
subscribers.
The latest cuts are expected to affect employees across the board.
Last
month, AOL announced that it was consolidating its advertising
operations to share innovations across the company and help potential
advertisers more easily buy ads.
The idea is to help marketers
reach Internet users not only across AOL properties but also at outside
sites for which AOL now brokers ad sales.
In a memo to employees obtained by The Associated Press, Falco described the latest cuts as difficult but necessary.
AOL
has acquired a number of companies in recent months and added to its
payroll each time. The purchase of ad-targeting technology specialist
Tacoda Inc., for example, brought in about 100 employees.
The
latest reductions would allow AOL to keep making such purchases and
perhaps expand its advertising sales team while keeping payroll costs
steady.
The cuts affect about 1,200 positions in the United
States, including 750 in northern Virginia, where AOL has long had its
headquarters.
Most of the affected employees in the U.S. were to
be informed and terminated Tuesday, while reductions abroad were
expected by year's end. Severance packages are to include at least four
months' pay.
None of the reductions is directly related to AOL's
recent announcement that it was moving its headquarters to New York to
be closer to the media advertising industry. Most of those employees
already work in New York. Senior executives like Falco, meanwhile, are
expected to keep offices at both locations.
AOL has been counting
on ad growth to offset declines in subscription revenue, which
continued to plummet, as expected, following its strategy shift in
August 2006. AOL had 10.9 million paying U.S. subscribers for Internet
access as of June 30, a 60 percent drop from its peak of 26.7 million
in September 2002.
After four quarters of at least 40 percent
growth, though, AOL ad revenues increased by only 16 percent in the
quarter that included April through June.
Workers at AOL's
Dulles, Va., campus had speculated for weeks that big layoffs were
coming. Speculation intensified last week, when workers reported seeing
large pallets of empty cardboard shipping boxes arrive at an AOL
warehouse, presumably for laid-off workers to empty their desks.
Shares in AOL LLC's parent company, Time Warner Inc., dropped 19 cents, or 1 percent, to $18.79 in Monday trading.
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