AOL Moving Executives, Headquarters To New York

By Zachary A. Goldfarb and Sam Diaz
Washington Post Staff Writers
Tuesday, September 18, 2007

AOL, the Dulles-based Internet pioneer, yesterday said it was moving its headquarters to New York, transferring the leadership of a company that fueled the growth of the Washington area's technology industry over the past decade.

The company said that while senior executives would depart for Manhattan, most of the 4,000 employees at the Dulles campus would remain. The shift is the latest step in the company's transformation from a provider of dial-up Internet access to one focused on online advertising.

AOL has spent the past year or so buying several online advertising firms to pitch products across a variety of technology platforms, whether they be Web sites, mobile phones or Internet videos.

"The move is really a realization that advertising is becoming an enormous part of our business," Randy Falco, chairman and chief executive of AOL, said in an interview. He added that New York is the center of the advertising universe and "it's critically important for us" to be there.

Local technology executives said the departure of the headquarters staff would likely trigger an exodus of talent from Dulles, but there was debate about whether the exits would diminish the region's status as a technology center or reinvigorate it, as former employees form or join other start-ups.

Former AOL executives in the past have helped create a local network of technology firms, signing on with companies in online music, Internet phone service, and other Web technologies, with varying degrees of success.

"I would anticipate the move will only accelerate the ongoing exodus of management talent in the company," said Adam Lehman, formerly an AOL senior vice president and now a Baltimore venture capitalist.

Falco would not rule out layoffs in the future. "In some places," he said, "we're going to be adding resources, and in other places, just because of the nature of the business, we'll be scaling back parts of the business."

A mainstay of the dot-com age, AOL, formerly known as America Online, used its high-flying stock to take over venerable Time Warner in 2001. But the marriage did not go smoothly, and an accounting scandal forced the company to pay $300 million as part of a settlement with the government.

The media conglomerate eventually dropped AOL from its corporate name, relegating the online unit to subsidiary status and leaving it in Dulles.

One source familiar with the thinking of AOL's senior management said there remains interest inside the media giant to eventually spin off the Internet operations into a free-standing company.

But another source familiar with Time Warner's management said the company is content with keeping AOL in-house to see if it can grow. Both spoke on the condition of anonymity because they were not authorized to speak on the corporation's behalf.

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