AOL looks to slash staff by a third

AOL, which will be spun off from parent company Time Warner next month, wants to cut its staff by about a third, and is giving employees a chance to volunteer to join the ranks of the unemployed.

AOL has announced a "voluntary layoff program" that will run between Dec. 4 and Dec. 11 and that seeks up to 2,500 employees willing to resign. The company's current headcount is about 6,900.

"We will need to do an involuntary layoff if we do not reach the target numbers through the voluntary option. We believe the voluntary program gives people more choice and decision-making ability instead of waiting for the final cost recommendations and involuntary layoffs," AOL spokeswoman Tricia Primrose said via e-mail on Thursday.

In addition, CEO Tim Armstrong has decided he will not accept his bonus this year.

AOL's revenue dropped 23 percent year-on-year to $777 million in the third quarter, ended Sept. 30. Of particular concern is that advertising revenue fell 18 percent, since AOL is on a years-long transformation from a subscription-fee based model to an ad-supported model.

By contrast, global ad revenue fell only 1 percent in the third quarter, according to IDC.

AOL's online ad market share in the U.S. has fallen from 8.2 percent at the beginning of 2005 to 4.4 percent in this year's third quarter, according to IDC.

AOL's subscription revenue dropped 29 percent in the third quarter.

Last month at a conference in San Francisco, Armstrong said AOL is building "a large platform around content and monetizing that content" that represents a strategic shift for the company.

To support this new strategy, AOL has in the past six months grown its staff of journalists from 500 to 3,000, he said.