New York — The onset of the New Year has heralded bundles of dismay for many workers, with continuous news of job cuts coming amid tough times. Despite remarkable traffic growth as high as 27% yearly on its associated Web sites including new personal finance news service WalletPop, Time Warner Inc.’s underperforming AOL Internet unit is not spared of the depression and will cut about 700 jobs, as it faces an advertising slump, 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 informing his employees that even those who will be remaining with the company should not 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 will be doing everything we can to help and support those affected, including offering severance packages and other services.”
The decision to terminate will affect roughly 10 percent of the Time Warner unit’s global work force, and will be mostly complete by the end of March.
“Online marketers have tightened their ad buying across the board, reducing their spending by hundreds of millions of dollars,” Falco stated in a memo to AOL staffers. “As a result, we will be reviewing our entire organization to further align resources and expenses against the real revenue opportunities in this difficult market.”
Many of the job cuts will take place in the United States and in units that do not straightaway support AOL’s three core businesses: Platform A, its ad network unit; MediaGlow, consisting of AOL and other in-house sites; and People Networks, its social media cluster containing Bebo, AIM, Goowy and other properties, and will be finalized by the end of March, he said.
The rest will be made abroad over the next several quarters. Employees will also be deprived of merit raises this year, he said.
Time Warner, earlier this month reported that AOL had weaker-than-expected advertising sales in the fourth quarter, forcing a profit warning by the media conglomerate, which also owns cable news network CNN and Warner Bros movie studio.
UBS analyst Michael Morris said he is forecasting a 12 percent decline in AOL’s fourth-quarter advertising sales.
“We expect advertising declines at AOL to continue through all four quarters in 2009,” said Morris in a note to clients.
Time Warner has been exploring possibility to merge with Yahoo and Microsoft Corp to combine AOL’s advertising business with either or both of those companies, aiming to gain greater audience scale.
At the start of this month, Time Warner Chief Executive Jeffrey Bewkes also met with Microsoft CEO Steve Ballmer and Yahoo Chairman Roy Bostock at Time Warner’s New York headquarters to discuss the matter further.
Additionally, Falco said that steps have been taken to cut costs, including freezing merit-based pay increases and consolidating its two facilities in Mountain View into one.
In its cost-cutting measures, the company is examining international operations and its global shared-services functions and is considering consolidating some domestic facilities as it moves corporate headquarters to New York from its hometown of Dulles, Virginia.
An AOL spokesman said the company had no comment.