AOL will announce layoffs of five percent of its staff today, with 500 employees expected to lose their jobs.
In an interview yesterday, AOL CEO Tim Armstrong said that most of the cuts will come in its corporate units, while resources will be shifted more at mobile, video and data offerings going forward.
"The layoffs are related to a 2017 strategy where we will add to our business," he said. "These are super targeted by area and we will be re-growing especially in video and mobile."
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Armstrong reiterated that plan in a memo to employees that was sent. "Based on our strategy and the changes we see in the industry, we are reshaping parts of the company today," he wrote. "The company ... will be aligned to drive a talent and operations plan in line with profitability."
The cuts come after AOL added about 1,500 workers this year from an advertising deal with Microsoft and its purchase of Millennial Media, which prompted the consolidation to improve financial performance.
"The best way for us to grow is to move in front of change rather than be moved by change," he wrote.
AOL, a company which has gone through many organizational iterations over the years before it was bought by telecom giant Verizon last year, is currently split two parts, media and platforms. Most of its content properties like the Huffington Post and TechCrunch are in the media unit, while its advertising technology is in the platform groups.
Armstrong said the layoffs are not related to current discussions AOL execs are having with Yahoo counterparts about integration between the two companies. Later, there will also be plans for Yahoo itself too.
Verizon said earlier this year that it would pay $4.6 billion for Yahoo, but the completion of the acquisition remains mired in issues related to a breach that impacted 500 million customer accounts.
Yahoo is investigating the hacking, which sources said appears more serious than the company originally reported. Yahoo itself reported last week that the breach took place earlier than was previously reported. The situation has prompted Verizon to seek changes in the deal's price — of upwards of $1 billion — to protect it from potential liabilities.
As Verizon and Yahoo continue those talks, AOL and Yahoo will continue to discuss possible integrations and to determine which Yahoo execs could be part of leadership. AOL, for example, recently lost its top sales exec Jim Norton, a position that most obviously would go to Yahoo's chief revenue officer Lisa Utzschneider.
Here's Armstrong's full memo to AOL staff:
Over the last 3 months, we have solidified the operating plan we will use to propel AOL to our 2020 goals and mission of Building Brands People Love. Our process forced us to look at our strategy, goals, and organization in relation to the dynamically changing industry we compete in as a company. Based on our strategy and the changes we see in the industry, we are reshaping parts of the company today.
The company will be focused on two simple global business units: Media (including Search and Communications) and Platforms and will be aligned to drive a talent and operations plan in line with profitability.
Mobile, video, and data are the key growth drivers of that strategy and the company will be putting resources into each of these areas.
There a few important principles and factors driving our strategy decisions for 2017:
1. Despite being in the midst of transitioning to a business model that heavily relies on off-network content distribution and programmatic advertising, we will operate profitably in the new industry paradigm. We have always chosen to make changes ahead of the curve and we are doing that again today.
2. Due to the deals we have done over the past 12 months, we have added over 1,500 new people to the company. As we have settled into those changes, there are a number of areas that require consolidation to improve operations and limit the amount of hand-offs in our business processes. This will impact a small percentage of the global workforce.
3. Our planning process was built around the strategy and around the best way to operate that strategy. Each area within the company was reviewed through the lens of our strategy and while we will be reducing some areas for 2017, other areas will add headcount and resources.
4. The talent we have at the company is very strong. The changes we are making are about setting the company on a path to successfully operating in today and tomorrow's reality.
We have a mission and responsibility to continue to move AOL into the future - something we have done a good job of in the past. The best way for us to grow is to move in front of change rather than be moved by change. The more we differentiate our strategy and products, the more we move from strategy to execution, and the more we speed up our product delivery, the more value we will confer to our consumers and customers - and that is where our focus needs to live.
Teams across the company will be meeting with their managers today to discuss the changes. The talent affected at the company today is important and we will come together to help our people take the next steps in their careers.