On Tuesday morning 1200 AOL employees received their severance packages
as the company continues trying to find its footing
outside of the walled garden. Evidently, the transition to an advertising-supported web portal isn't going as well as they hoped. A memo
from AOL CEO Randy Falco suggests a couple of the reasons they might be having problems. First, it's not clear whether they consider themselves fundamentally a technology company or a media company. Some of their products—especially email and MapQuest—face technology-focused competitors like Google and Yahoo who have been rapidly improving their products' capabilities. Others, such as "Food" and "Money & Finance," are competing more with traditional media outlets like CNN or the New York Times.
The two types of companies tend to have different corporate cultures and pursue different business strategies, so being evenly split between the two might not be such a good strategy. Falco's memo also focuses a lot on AOL's advertising platform, but that seems like putting the cart before the horse; if you don't have a compelling product and growing traffic numbers, the best advertising platform in the world won't help. AOL may also be handicapped by the perception by many (including me) that AOL is the Internet for beginners. That was a great perception to cultivate when a lot of people were using the Internet for the first time, but it's not so great once most Internet users start to feel comfortable with the Internet and want to take the training wheels off. I have a feeling that this week's layoffs won't be the last of the painful changes at AOL.