Layoffs at AOL - Advertising gold rush continues

Some bad news at AOL - they are laying off 2000 of its 10,000 employees. CEO Randy Falco sent out a letter this morning, explaining the reasons behind the cutback. Kara Swisher at All Things Digital, published the layoff letter.

Dear AOL colleague,

Just over a year ago, AOL embarked on an incredibly complex and significant transformation as we fundamentally shifted our business model from a subscription-based ISP to an advertising-supported Web company.

We aggressively expanded our advertising capabilities, building on the strength of Advertising.com and our premium ad sales force.

Clearly, the big gold rush for the major online companies are the ad dollars, and shoring up the advertising networks has become priority #1. Google has a clear lead in the ad race with 56% of all searches in the US, followed by Yahoo at 23%, and Microsoft with 11%. AOL is bringing up the rear with 5%.

Google, acquired DoubleClick earlier this year, for a resounding $1.3 billion. Google is also making definite forays into the mobile advertising market.

Microsoft bought aQuantive, a digital marketing company for $6 billion, making aQuantive the largest acquisition for Microsoft. AQuantive is the parent of Razorfish, the marketing company that was the darling of the last boom, along with DRIVEpm and Atlas.

On the heels of Google’s acquisition of DoubleClick, Yahoo acquired Right media for $680 million.

AOL acquired a controlling stake in the German ad company, ADTECH AG.

From the AOL layoff letter:

We aggressively expanded our advertising capabilities, building on the strength of Advertising.com and our premium ad sales force. We acquired three leading-edge advertising companies–ADTECH, Third Screen Media and TACODA–and formed Platform-A. AOL now has one of the largest and most sophisticated ad networks in the world, and we’re well positioned to compete where the ad market is heading.

AOL’s current strategy will be geared towards “three core areas–Platform-A, Publishing and Access” according to CEO Randy Falco. Platform-A will enable AOL to serve ads over their own as well as third party sites. Content (publishing) sites provide the basis for the ad network, which the Access platform (AOL’s traditional and highly profitable ISP business) will provide the cash to build the other businesses.

In spite of the impending layoffs, some credit should go to AOL for building, and articulating a clear vision of where it sees itself in the future.


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