I’m heartened to learn AOL is moving their headquarters next spring from Dulles Virginia, where they’ve been situated since 1985, to NY City, since I won’t be there.
The new location is a place I missed working at by just a hair some years ago: 770 Broadway, a floor above a company I almost transferred to about 12 years ago. I lived on Long Island at the time surrounded by farms and fields, and I liked the scenery, so I turned the move down, and wound up leaving New York, anyway. Now if I move back I know where not to uh…shop.
AOL’s air-brained Randy Falco claims moving to NY will send:
…a clear signal to the market that AOL intends to lead in this space.
Who knew that’s all it takes to turn their reputation for scatter-brained, indecisive, bad business decisions into one that will earn hushed respect from media companies, advertisers, Wall Street, and concerned interests the world over?
While it’s been said that the Dulles building will remain staffed and layoffs are not expected as a result of the move, almost everyone else with a pulse, including Henry Blodget, has begged to differ. Blodget has fine-tuned his AOL Layoff Spreadsheets to account for any rise, fall, or leveling off in ad sales through the end of the year. While he claims that currently no layoffs are needed, he also claims up to 5,500 people could get axed if ad.com’s sales don’t pick up soon.
Update: Since I wrote this I’ve heard from a very well-placed, highly reliable source that top-level Virginian management says the actual figure is one in 3 people will be laid off, 33% of the current workforce. As Henry Blodget noted yesterday, the layoffs are scheduled for October (in just another week, I suppose, since I’m writing this in the 22nd). The reason for that is AOL doesn’t want to be seen as axing people over the holidays. They should’ve thought of that last year, and the year before, and the year before that, when the carnage around the holidays was just unbelievable.
In what looks like AOL’s “Media Blitz Day, 2007” there’s more to report than I can possibly cover at the moment but I’ll do a few highlights.
The real reason for the move:
Ad.com Insanity [Code-Name: Platform A]
As the New York Times notes, AOL will:
…base all of its advertising sales out of New York through a group the company is calling Platform A. That group will be lead by Curtis G. Viebranz, the former chief executive of Tacoda, an advertising targeting company that AOL acquired in July for a reported $275 million.
They’re moving the bulk of the company to focus on advertising. They run a free portal, email, and chat service, have fired almost all their call center staff, aren’t focused on gaining or retaining members, and as recently settled lawsuits prove, they still make it mighty hard to cancel, and removing that copy of AOL 9.0SE you’ve been using since early 2005 is still, quite frankly, a bitch. But AOL doesn’t care.
Advertising.com, an acquisition AOL made to great hoopla in 2004 that’s failing them now, will power the revenue monster they see building in NY while they focus on anything but their members.
Here’s a flow chart I found on IP Democracy that shows how Platform A works. You’ll notice there’s no mention of members, member services, ISPs, or anything else customer-oriented in the chart. That’s because AOL doesn’t care about people; they didn’t care about people even when they were charging through the nose for services; now at least they’re open about making money strictly through advertising and ignoring all else.
As Henry Blodget notes:
Before being infected by the company’s enthusiasm about ad networks, remember: They generate tons of revenue but relatively little profit. Selling $1 of advertising on AOL’s properties probably nets the company $0.50. Selling $1 of advertising on Advertising.com, Tacoda, and other third-party serving/rep services–no matter how technically sophisticated–probably nets the company about $0.10.
Analysts: There’s No Strategy, So Sell AOL Now
According to Media Post, analysts are biting at Time Warner to sell AOL, basing their lowered valuations on AOL’s lack of business strategy, diminished advertising revenue, rumors of upcoming massive layoffs, and other warning signs.
Everyone but TW head Dick Parsons seems willing to heed the warnings; according to CNN.com, he alone remains unperturbed by suggestions that AOL is in trouble, and is disinterested in splitting AOL off, but Jeff Bewkes is expected to replace Falco by the end of the year, and there’s still a chance his outlook on AOL and Parson’s will differ in the right way.