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AOL CEO: Layoffs today, bright future ahead

By Joab Jackson
March 10, 2011 03:48 PM ET
AOL CEO Tim Armstrong
AOL chairman and CEO Tim Armstrong speaks during the 2011 Bloomberg Media Summit in New York. (Photo by Lucas Jackson / Reuters)

IDG News Service -

Despite laying off 20% of the AOL workforce Thursday, AOL CEO Tim Armstrong foresees 2011 as the year that AOL will start to grow again.

The company is in the process of laying off approximately 900 workers, it announced Thursday, the same day Armstrong spoke at the Bloomberg Media Summit, held this week in New York.

At the conference, Armstrong attributed the layoffs to the changing business model of AOL, which is moving from being an Internet service provider to an ad-driven online content company.

"Today is a very difficult day for the company because people's jobs are impacted," he said.

However, he noted, "we are in a comeback situation and my job and management's job is to stay on top of what we need to do organizationally to change the company, and we're not going to shy away from that."

Despite the fact that the company is laying off personnel, Armstrong expects to hire more workers, particularly those in the editorial field.

While once the dominant U.S. provider of dial-up online services and associated services, AOL has floundered over the past decade as users gravitated toward broadband providers. For fiscal 2010, the company posted a net loss of $782.5 million, as well as sinking revenue, from $3.2 billion in 2009 to $2.4 billion in 2010.

The dial-up business still accounts for about 40% of AOL's revenue; AOL still has about 2 million U.S. subscribers to that service. But Armstrong expects that number to decline by 25% to 29% a year. Armstrong sees AOL's focus as providing content and other Web services, and generating revenue by ads that will run alongside these offerings.

To this end, the company recently acquired, for $315 million, the Huffington Post, a Web news site that garners 253 million unique visitors per month.

"The Huffington Post deal for us really was about trying to transition the company to be more of a digital media company," Armstrong said. He noted that, despite its increasing focus on content, AOL still employs largely a technical workforce.

AOL is now combining The Huffington Post operations with all its own media properties, creating a new unit called the Huffington Post Media Group. Huffington Post co-founder Arianna Huffington will lead the new group as president and editor-in-chief, Armstrong said.

Prior to the acquisition, "AOL had roughly 400 content engineers and 400 full-time editorial people internally. That's not [the make-up] of an Internet company. An Internet company has a small number of engineers building something many editorial people can work on," Armstrong said.

Reprinted with permission from IDG.net. Story copyright 2014 International Data Group. All rights reserved.
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