Tim Armstrong

AOL is set to announced a sizeable round of layoffs on Thursday.

Recode’s Kara Swisher reported 5% of its global workforce, or 500 employees, will be affected.

AOL’s direct sales team has been materially affected by the staff cuts, according to separate sources, who said a large number of roles were being eliminated, although they could not confirm how many.

An AOL spokesperson told Business Insider: “We are impacting a small percentage of our global workforce.”

AOL is also planning to wind down the Be On branded content network it launched in 2013 and fold it into the wider One by AOL team, a source told Business Insider. An AOL spokesperson told Business Insider that the suggestion Be On was being wound down was “not accurate.”

A page related to Be On still exists on the AOL advertising website, but it is not easily navigable from the homepage and no longer appears under its list of “properties,” alongside the likes of The Huffington Post and Microsoft, with which it has a deal to sell display ads across MSN, Xbox, Skype, Outlook, and Windows. 

When that deal was signed back in June 2015, around 1,200 Microsoft Advertising direct sales employees shifted to AOL. 

The news comes as AOL prepares to become a merged entity with Yahoo. AOL parent company Verizon announced in July its intentions to acquire Yahoo for $4.8 billion.

The thinking behind the layoffs is likely to be an exercise to de-duplicate roles that will exist once Yahoo becomes a Verizon company. Sources told Business Insider that rationally, this makes sense, as Yahoo generates more in direct sales revenue than AOL — and Yahoo’s severance packages are a lot larger than those at AOL.

The Verizon/Yahoo acquisition process has been prolonged, however, owing to Yahoo confirming in September it had suffered a huge hack attack, affecting at least 500 million users. 

Yahoo gave Verizon just two days notice before the public knew it had been breached by a “state-sponsored” attacker. Verizon’s general counsel said in October the company has “reasonable basis” to believe the attack had “material impact” on the deal. Verizon is reportedly seeking $1 billion discount off the sales price as a result, although Verizon CEO Lowell McAdam dispelled these reports as “total speculation” in October.

A string of senior executives has left AOL in recent months — many of which were considered CEO Tim Armstrong’s closest lieutenants.

Marta Martinez, AOL’s SVP of advertising, left the company a few weeks ago and was the company’s most recent senior departure, sources told Business Insider. Her exit follows that of AOL’s president of media brands Luke Beatty, who left earlier this month; global sales chief Jim Norton who left in October and landed a new role at Condé Nast; and executive vice president of AOL content and consumer brands Jimmy Maymann.

Maymann was brought on board by another former AOL employee, Arianna Huffington, who announced in August she was stepping down from the Huffington Post media company she founded in 2005 and sold to AOL in 2011 to focus on her new startup, Thrive Global.

AOL laid off around 100 staff in December last year, which hit two-thirds of its membership division, plus staffers in centralized roles such as marketing, advertising, and social media.

Here is the letter AOL CEO Tim Armstrong sent to employees on Thursday:

“AOLers –

Over the last 3 months, we have solidified the operating plan we will use to propel AOL to our 2020 goals and mission of Building Brands People Love. Our process forced us to look at our strategy, goals, and organization in relation to the dynamically changing industry we compete in as a company. Based on our strategy and the changes we see in the industry, we are reshaping parts of the company today.

The company will be focused on two simple global business units: Media (including Search and Communications) and Platforms and will be aligned to drive a talent and operations plan in line with profitability.

Mobile, video, and data are the key growth drivers of that strategy and the company will be putting resources into each of these areas.

There a few important principles and factors driving our strategy decisions for 2017:

1. Despite being in the midst of transitioning to a business model that heavily relies on off-network content distribution and programmatic advertising, we will operate profitably in the new industry paradigm. We have always chosen to make changes ahead of the curve and we are doing that again today.

2. Due to the deals we have done over the past 12 months, we have added over 1,500 new people to the company. As we have settled into those changes, there are a number of areas that require consolidation to improve operations and limit the amount of hand-offs in our business processes. This will impact a small percentage of the global workforce.

3. Our planning process was built around the strategy and around the best way to operate that strategy. Each area within the company was reviewed through the lens of our strategy and while we will be reducing some areas for 2017, other areas will add headcount and resources.

4. The talent we have at the company is very strong. The changes we are making are about setting the company on a path to successfully operating in today and tomorrow’s reality.

We have a mission and a responsibility to continue to move AOL into the future – something we have done a good job of in the past. The best way for us to grow is to move in front of change rather than be moved by change. The more we differentiate our strategy and products, the more we move from strategy to execution, and the more we speed up our product delivery, the more value we will confer to our consumers and customers – and that is where our focus needs to live.

Teams across the company will be meeting with their managers today to discuss the changes. The talent affected at the company today is important and we will come together to help our people take the next steps in their careers.”

SEE ALSO: AOL chief Tim Armstrong on the ‘concerning’ Yahoo hack and how he’s convincing workers not to leave post-acquisition

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