AOL To Lay Off a Third of Employees. Then What?

As AOL spins off from Time Warner, it's undergoing a dramatic overhaul as an online content provider. But like many a makeover, this will require shedding some weight. Well, a lot of weight. AOL is looking to lay off about 2500 employees -- a third of its staff. What is AOL trying to do, again?


Build a journalism empire, of course! From politics and finance to the smallest nichefied crannies of content, AOL is trying to shed its dial up cocoon and hope the butterfly underneath can survive in a crowded media network ecosystem. I think this is a bold strategy -- and AOL certainly needs to go bold at this point -- but let's talk about this cocoon for a second.

Dial-up still makes up about half of AOL's revenue. That's a lot of revenue to make up with a new business model that basically relies on making online journalism work. That goal has proved elusive for many companies. AOL is new to the journalism game, but that's an advantage. They can focus on hiring web-savvy minds rather than try to digitize a fusty newsroom and teach grizzled vets to blog. I'm not going to count out Tim Armstrong or the company, but as a 33 percent layoff mandate suggests, it's going to be a rough transition period.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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