AOL to Cut 2,000 Jobs as Part of Transition to Online Ad Company

NEW YORK (AP) — 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 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.