As expected, chief Tim Armstrong announces major staffing cuts: 200 employees laid off in U.S.; 900 worldwide
AOL chief Tim Armstrong announced major layoffs on Thursday.
The cuts, while expected, were big: 200 employees in the U.S., and roughly 900 worldwide. All told, about 20 percent of AOL's 5,000 employees were let go.
"Today is the next critical step on the comeback trail for AOL," Armstrong wrote in a memo announcing the restructuring. "We are creating a next generation hyper-local, national and global media company, and every action we’ve taken since AOL became an independent company has taken us further down that path."
The 200 U.S. jobs will come from AOL's media and tech groups, while the bulk of the cuts overseas will be in India. All "impacted employees" will be notified by 3 p.m. (EST) today, he said. A conference call for AOL's remaining employees is scheduled for 5 p.m.
The move comes less than a week after AOL closed on its $315 million acquisition of the Huffington Post — and a little more than a year after AOL cut 2,500 jobs. Armstrong said the cuts would save the company about $20 million in the short-term.
A representative for AOL said Armstrong would not be available for comment beyond his memo Thursday. A representative for the Huffington Post did not return an e-mail seeking comment.
"AOL remains in the middle of the disruption that the Internet is causing and we are starting to move from being a disrupted brand to a brand that is leading the disruption," Armstrong wrote. "The changes we are making are not easy, but they are the right changes for the long-term health of the company, the brand, and for our employees."
In terms of content, Armstrong said AOL's plan is to replicate the editorial-driven model of the Huffington Post (now the Huffington Post Media Group within AOL) across AOL's media brands. However, the editorial staffs for several of those brands — AOL News, Daily Finance, Walletpop and Politics Daily — have been "decimated," according to Jeff Bercovici, who worked at Daily Finance before jumping to Forbes.
"The editorial-driven model of The Huffington Post Media Group will change the way we create our content," Armstrong wrote. "Going forward, AOL will invest more heavily in our in-house editorial team and transition away from a reliance on freelance journalists. Journalists are the heart and soul of a media company, and our reporters and editors will be working closely with the tech group to produce compelling and engaging editorial content — including lots of video."
Here's Armstrong's entire memo:
From: Armstrong, Tim
Sent: Thursday, March 10, 2011 5:46 PM
To: Armstrong, Tim
Subject: AOL’s Next Step
Today is the next critical step on the comeback trail for AOL. We are creating a next generation hyper-local, national and global media company, and every action we’ve taken since AOL became an independent company has taken us further down that path. Our strategy remains clear: create high quality content experiences for consumers, at scale. As the digital landscape quickly evolves, so must our business, and we must continue to transform our organizational structure to one that works for today’s Internet.
Today, we are announcing an organizational structure that will significantly improve AOL’s ability to focus on growth. The structure will also impact areas of our team — making the decision to reduce staff levels is a necessary part of rebalancing our workforce to be competitive in our industry. Affected employees will be notified today and AOL will offer assistance programs — including workspace, counseling, and technology. We ask all of our employees to help impacted employees find career opportunities within our industry.
The structural changes at AOL are possible because of the progress we have made as a team in the last 12 months. The majority of our sites have materially improved their consumer experiences, our advertising business continues to get healthier and more innovative, our video position is strengthening everyday, our local footprint is quickly expanding, we are attracting some of the most talented people in the world to work at AOL, and our technology infrastructure is simpler and more robust. AOL is a global brand and a global opportunity and we are doing the hard work that will once again make the company an industry leader.
There are three important aspects to the structural changes we are making today. The first is the architecture of our brand portfolio. The second is the organizational design of The Huffington Post Media Group. The third is our shift from India being a business process center to India being a consumer products group focused on the APAC market.
New Structure: Investing in our Brand Portfolio
AOL’s brand portfolio has become more focused and stronger over the last year and we will continue to invest in our brands. We are committed to an AOL brand architecture that empowers us to build best-in-class brands that serve valuable audiences with incredible content and great experiences. As you have seen and have access to, AOL’s brands are measured with a consistent set of criteria that will allow us to transparently judge the health of each brand. As we considered adding The Huffington Post, we looked at the combined assets of the two companies and have found creative ways to strengthen our portfolio and will continue the brand refinement process over time.
AOL will have four areas of significant brands: Media (Media & Ads – including Local), Publisher Networks (Media & Ads for Publishers), Applications (Communications, Mobile, Commerce), and Subscriptions (Paid Subscribers).
We have a clear path to brand success — which is only turbo-charged with the addition of the Huffington Post to our brand portfolio. We have an AOL brand that enjoys 99% brand awareness and our commitment to reinvigorating the AOL Brand has enabled us to begin to shift brand perception of AOL — including being named as one of the top 50 brands “loved” by consumers at the end of 2010. We will continue to invest in the AOL Brand as well as support best-in-class brands that will allow us to grow our overall audience and reflect our focus on the most valuable audiences — our 80, 80, 80 strategy.
New Structure: Huffington Post Media Group
The addition of the Huffington Post will be a core foundational element in our drive to be a leading digital media and brand advertising company. HuffPost attracts over 27 million people a month – its unique visitors have increased 588% over the last three years, and revenue has increased 400%. The company is leading the way in connecting content with social communities. AOL will be replacing approximately $20 million of loss in our news and finance operation with a high growth company and a team that is pioneering the way the world gets information.
The newly formed Huffington Post Media Group (HPMG) is a vehicle to house and grow our investments in journalism and content in general. The goal of HPMG will be to create compelling, content-driven experiences for users. Consumers, world-class brands, relevant audiences, and innovative brand advertising opportunities are a winning formula for the future of the web and HPMG will have significant resources and distribution to be a leader in our space.
With Arianna’s leadership and vision, HPMG will be fueled by high-quality editorial content, and will give AOL the enhanced ability to deliver a scaled and differentiated array of premium news, analysis, entertainment, information, and community – all integrating our local, national and global content initiatives. As President and Editor-in-Chief, Arianna will lead the content vision. Jon Brod, as HPMG Chief Operating Officer, will be Arianna’s business partner and lead the business strategy for HPMG. We will replicate this model through the vertical content areas and become an editorial-led media organization that allows us to create higher quality content in real time, while better aligning the editorial and business sides of our company.
We are creating Department Editor positions for each of the editorial departments and their partners will be the General Managers (formerly our Mayors), who will continue to serve as CEOs, driving revenue, distribution and overall growth strategy for the departments they support. We will be expanding the advertising programs (like Project Devil) and the distribution opportunities (like mobile and video) through the work of the GMs. GMs will also work to connect the content brands with our central sales force.
The editorial-driven model of The Huffington Post Media Group will also change the way we create our content. Going forward, AOL will invest more heavily in our in-house editorial team and transition away from a reliance on freelance journalists. Journalists are the heart and soul of a media company, and our reporters and editors will be working closely with the tech group to produce compelling and engaging editorial content – including lots of video.
As part of this enhanced focus on quality journalism, we will be making new editorial hires in the HPMG as well as continuing to expand and grow Patch. With the acquisition of The Huffington Post and this renewed focus on editorial creation, we have increased the number of staff dedicated to content creation to over 1200 people and remain a net importer of journalists.
As a result of this new structure, close to 200 people will be leaving the AOL Media and tech groups in the US. These changes, among others, will be necessary as we execute our Media Group’s vision of creating real-time engagement and continuing to build a comprehensive source of compelling news, entertainment, information, opinion, and community. Specific elements of this integration are still being finalized, and we will communicate them to you as soon as we know more.
New Structure: Refocus in India
India is an important consumer and business market for AOL and we have a talented workforce covering many aspects of our business. As Kumar has announced to AOL India, as part of the new organizational structure, we have decided to focus our efforts on the India consumer market and move the business processing functions to scaled partners. India is gaining importance as a consumer market and we are actively working on products for that market and will be ramping up research and product engineering after the restructuring. A small number of project engineering functions will transition to Dulles and Dublin, while India starts to focus on Asia and India related consumer products and revenue.
Back office and support functions will transition to 3rd party partners and many current AOL India employees will transition along with those roles to continue to support core AOL functions with new partner companies. For our business and our scale, it makes business and financial sense to partner with other providers.
Overall, the structural changes in India will impact close to 700 jobs, with approximately 400 transitioning out of the company, and 300 transitioning to outsourcing partners to continue to work on the AOL business. AOL India has been a significant part of AOL, starting with call center outsourcing in 2002 and morphing into a business operations center. The employees of AOL India are talented, energetic, and hard-working – and we will be offering impacted people transition services. I would hope that India becomes a great future consumer market for AOL based on India-first product development.
Today is a day that represents a step toward the future, but also a day where change will cause an impact across our team. AOL remains in the middle of the disruption that the Internet is causing and we are starting to move from being a disrupted brand to a brand that is leading the disruption. The changes we are making are not easy, but they are the right changes for the long-term health of the company, the brand, and for our employees.
Impacted employees will be notified by 3 PM EST today and we will be scheduling an all-employee call at 5pm EST to answer any questions you may have. Please do not hesitate to reach out to me directly – TA