AOL to let go of 700, even amid its recovery

Despite impressive traffic growth as high as 27% annually on its associated Web sites including new personal finance news service WalletPop, AOL is also faced with cutting back resources to survive the present economic situation.

This afternoon, a memo first obtained by The Wall Street Journal's Kara Swisher cites AOL CEO Randy Falco as telling his employees that even those who will be remaining with the company shouldn't expect much special this year.

"Reducing our workforce is never easy, particularly in the current climate," Falco wrote, "but our goal in doing this is to provide our core businesses the resources they need to thrive. Please know that, as always, we'll be doing everything we can to help and support those affected, including offering severance packages and other services."

The decision will affect 700 employees, or about 10% of the content provider's current workforce. It comes during the second year of a two-year turnaround plan, Falco noted, though he went to great lengths to illustrate that the dynamics of that plan -- which include refocusing on key content areas -- will remain on schedule, though perhaps with fewer people. Not all the company's headcount cuts will come in the US, but those which are concentrated here should take place before the end of March.

Many of AOL's recent projects have struck pay dirt. Most notably, as the WSJ's Peter Kafka noted yesterday, comScore numbers show WalletPop coming out of absolutely nowhere, after a dismal and critically panned launch, to best competitors including MarketWatch by orders of magnitude -- going from below-par to 500% of competitors' traffic in August alone.

According to comScore's numbers, AOL remains the #4 Web property owner in the country, with Web sites that regularly address as much as 57% of all US-based Internet users. And last week, AOL put the final touches on its revamped Web mail, in an attempt to begin recapturing share of a market it once dominated. The initial reviews there are good as well.

Yet even more impressive, what has become the real jewel in the crown for AOL has been its Platform-A advertising network, which is capable of reaching 91% of the total Internet audience, comScore estimates, and that number is only growing. So the AOL comeback has been legitimate and effective, and most of the news has been good...until now.

This evening, an AOL spokesperson denied to PaidContent.org a story appearing in TechCrunch this morning, stating that as part of a restructuring, AOL would sell the Bebo social network it acquired just last year for $850 million. The spokesperson is quoted as saying, "It's not true; there's absolutely no truth in it, it's ridiculous."

So if there's a good side to today's news, a 10% workforce reduction is not out of the ordinary for businesses in AOL's category, and it certainly does have the properties in both content and infrastructure to carry the company through. A downturn for AOL now would certainly be a U-turn.

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