AOL: More Layoffs Inevitable

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More layoffs are likely coming to AOL.

Next week, CEO Tim Armstrong will announce plans for the company to focus on four businesses — content publishing, ad network, local, and communications. AOL will fuel those four with revenues from its still huge but quickly shrinking access business.

What Tim might not say is that AOL does not need its current headcount of ~7,000 employees to pursue this plan.

A simple benchmarking exercise suggests that AOL probably needs about 5,000 instead of 7,000 employees.

  • A short-hand way to describe AOL’s content business, MediaGlow, is as a Gawker Media on steroids.  Including sales, domestic and overseas tech, HR, operations and even freelancers, Gawker employees ~140 people to run nine sites. MediaGlow wants to be over 100 sites by the end of the year. Using Gawker as a benchmark, the quick maths suggests it’ll need ~1,750 people to run the sites and sell premium ads against them.
  • Speaking with an executive familiar with the way Tim Armstrong ran his side of Google sales, we’d estimate that, doing $500 million in business, AOL’s ad network Platform A will need  ~1,200 people going forward.
  • AOL’s local business is comprised of local news site Patch, local events site Going, and MapQuest. Local reviews site Yelp does a lot of similar things with ~150 people.
  • AIM, ICQ and AOL Email probably require fewer resources to run than dominant social network Facebook, which employs ~900 people.
  • Finally, AOL’s nearest competitor in the access business is Earthlink, which employees ~750 people.

Total employees AOL needs to run these five businesses: ~4,750.

Current headcount: ~7,000

Much of the downsizing here will likely come through divestitures–the sale of Bebo, for example.  But in the grand AOL tradition of recent years, some of it will likely come through layoffs. 

Hopefully, Tim will finally turn the ship around and this really will be the last.

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