Earlier today, reports emerged that the US multimedia corporation AOL is cutting 500 jobs, i.e. over 5% of its total workforce. As sources close to the organization told Reuters, Tim Armstrong, Chief Executive Officer at AOL, broke the news to the company’s employees in an email. The majority of the cuts will be made in the firm’s corporate division, i.e. management, finance, human resources, marketing, and public relations. Armstrong explained this decision as a necessary step in AOL’s endeavor to minimize the amount of hand-offs in its everyday dealings following a massive wave of hirings which added over 1,500 employees to the company in the last year. These job openings were a direct result of the company’s acquisition of the advertising company Millennial Media, as well as its recently made advertising deal with Microsoft.
The consolidation with Millennial Media allegedly prompted the management to improve the overall profitability of AOL’s operations. That isn’t to say the New York City company is now firing 500 people just to cut its expenses. As sources told Reuters, the resources gained with this move will be redirected to AOL’s video, data, and mobile operations which were deemed more profitable in the long-term, while the company is also planning to regrow all of the corporate units it’s currently downscaling once it manages to increase its profits.
In other words, this upcoming round of job cuts isn’t directly related to the fact that AOL’s parent company Verizon is currently in the process of acquiring Yahoo’s core Internet business for just under $5 billion. Armstrong himself confirmed as much in an interview with Recode yesterday. AOL’s platform division which encompasses its advertising business is presumably currently in the process of figuring out the best way to merge with Yahoo. Namely, Verizon recently revealed that it’s planning to consolidate AOL with Yahoo in an effort to create a major mobile video platform designed to compete with other content producers and online advertisers on the market. Seeing how Yahoo owns Flickr, Tumblr, and Rivals, it’s not hard to understand why Verizon thinks it’s a good idea to include them in AOL’s existing media and advertising network. However, it may be a while before AOL and Yahoo manage to efficiently integrate their services as Verizon is currently trying to haggle over the price of its upcoming acquisition following news of a massive security breach Yahoo suffered in 2014.