Interview: Armstrong On Layoffs: ‘News & Finance Was Losing $20 Million’

AOL (NYSE: AOL) CEO Tim Armstrong warned that layoffs would be coming last week, and today, the pink slips were released. Armstrong spoke about the decision during a Q&A keynote session this morning at the Bloomberg Businessweek Media Summit. In a separate interview with paidContent when he left the conference, Armstrong discussed the reasons and the timing of the decision, which came after the completion of its $315 million acquisition of The Huffington Post. The buy has ushered in more refinements to AOL’s evolving content strategy.

In terms of U.S. jobs, about 200 AOL staffers, mostly on the content side, would be taking the hit, with the News & Finance unit being one of the main targets due to what Armstrong said were significant losses. In an effort to show that AOL’s focus was on building and not just reducing, Armstrong told the audience at the Media Summit conference that the number of editorial staffers would rise from 50 percent to 75 percent of headcount over the course of the year.

Meanwhile, TalkingBizNews reported that two of the AOL Money & Finance sites – and – were shuttered on Thursday. However, both sites are still live and an AOL rep told paidContent that the company will be taking a look at which individual brands will stay and which ones won’t. Separately, Wired’s Sam Gustin noted that a number of veteran journalists have been let go, including former NYT political reporter Melinda Henneberger (via FishbowlDC.)

The expected layoffs were announced this morning. How many jobs are being cut and where?

Tim Armstrong: Around 900 will be impacted. Of that, a little over 200 are in the U.S., mostly in the content business. The other 700 are in India and of that, up to 400 of those jobs will go to potential outsourcing partners or be in our development center. Overall, when all is said and done, because there’s a bunch of transition roles, the net effect will be 400 to 500 jobs will be outsourced, so those people will still retain those jobs.

Were the content job losses mainly driven by the addition of The Huffington Post?

The content side’s changes are driven by the need for AOL to become fully-digitally native. A lot of our companies and brands are, but there are others that need to be transitioned. For instance, in News & Finance, we’re losing about $20 million a year in that category. In contrast, Huffington Post is high growth and will be high profitability in that area. So the changes there reflect the ability for us to go from a model where Finance & News has been struggling as an internet business.

Can you give me a sense of the progress? I recall Yahoo’s Carol Bartz telling a conference audience that it took Steve Jobs seven years to rebuild Apple (NSDQ: AAPL). Do you feel an unwarranted sense of impatience from the press and investors?

There’s a number of things that I can point to in terms of the progress we’ve made: as an AOL consumer, the sites are better, content is better, the experience is better — all in a very quick time, about a year. You have to remember that when I was operating under Time Warner (NYSE: TWX), I was very limited in the kinds of changes I could make. We’ve made a fundamental shift in the way the company works. We just have to be diligent about it. I think in terms of patience levels, we don’t have seven years, we don’t have five years. I wake up every day thinking that we have to do the maximum and hope that we can string enough of those days together.

So with that in mind, traffic has been up at AOL lately and the revenue mix has changed. We had a lot of revenue coming in at one point that would not have been sustainable over the long term. We made a conscious decision to cut that out. It was a hard choice, but now we have double digit growth in ad pricing and big brands have been advertising with us. That will eventually pop out in the metrics that people on Wall Street will be happy with.

Over the past few months, you’ve acknowledged that because of the restructuring of the sales teams and the ending of some advertising programs that didn’t have long-term potential, display has been down for the past year. You’ve indicated that things would pick up in the second half of 2011. Has that pickup gotten any clearer?

I think we’ll show positive metrics by the end of this year in display. The market seems relatively strong and the product mix is set. But everybody has been talking about the opportunities in the online brand advertising space, including Google’s Eric Schmidt. AOL was among the companies who had their display units named as a standard by the Interactive Advertising Bureau.

Getting back to the content side, just days after the HuffPo deal closed, you acquired Was the announcement of that deal timed with the HuffPo closing or was it just coincidental?

I’ve been talking with CEO Mark Josephson for years. I think it was a company that augmented us with Patch and in turn, we augmented them. Over the past few months, I think we have each came to the point where we understand our business. I think the real complement now comes with having evolved into more of a b-to-b entity, because of the way they power local content on sites like CNN. Therefore, will probably retain its brand and serve those outside partners. And we’ll continue to have Patch as the consumer-facing business and use’s resources. We just closed on Friday, so I’ll leave you with the caveat that we probably need to talk more internally about that.

Over the past few months, it’s seemed as if AOL made another acquisition every other week. Any other acquisitions planned any time soon? Anything else this week?

I think things will be fairly calmed down by the end of the week. We’ll have more announcements next week in terms of the brands and our priorities. We’ll also announce some more hiring next week in the content area. That’s something to be on the look out for.

During the conference, you spoke a lot about a renewed emphasis on women’s content. Was the dissolution of Lemondrop, which was one of AOL’s earliest attempts to craft original content for young women?

I’ve talked before about our “80-80-80 strategy” — 80 percent of domestic are done by women as head of a household, 80 percent of purchases are local, and 80 percent of purchases are influenced by someone else — and we’ve been doing a lot of investment around those idea. When we talk about content for women, it’s not just moms. “Women” as general category are very influential and they’re only becoming more so. Connecting with that audience is very important to us. That’s what’s been driving the recent announcements about deals with Heidi Klum, Queen Latifiah and Ellen DeGeneres.

[In the case of Lemondrop], we’re going to coalesce around larger content sites for women, and to a lesser extent, niche sites around health and wellness. As long as there’s revenue and traffic, we’ll stick with those niche sites. But I think you’ll see us doing more around properties that offer a wider sense of commonality rather than a fleet of niche sites.

There’s been a lot of commentary about AOL constantly changing its strategy. How do you explain the flurry of changes the past year? Is it more than just refinements?

The strategy has not changed, but we do need to keep tweaking things going forward. It’s natural from the outside to think, “Oh, they’re changing again.” But we’ve done a lot of things that have made the changes necessary. Not to get too technical, but going from 24 content systems down to one or two is a big deal. But the general population doesn’t know about that. But from a business perspective, it’s pretty exciting.

I do want to make the point that companies do come down to the people in it. We tried to make changes that came down today thoughtfully. The company’s not going to be sucessful unless the people in it are successful and we understand that.