AOL is laying off 700 employees and freezing merit-based pay increases, Ad Age reports. CEO Randy Falco announced the cuts in a memo sent to staff.

"The deepening economic recession has affected every corner of the economy, including our own," he wrote. "Online marketers have tightened their ad buying across the board, reducing their spend by hundreds of millions of dollars."

The recession hasn't been AOL's only problem however. When Google invested $1 billion in the company in 2005, largely to gain a search deal with the online portal, AOL carried an implied value of $20 billion at the time, according to some back-of-the-envelope math done by Silicon Alley Insider. When Google released its fourth-quarter earnings last week, it wrote down $726 million of its investment in AOL. According to Google, that would put AOL's current value at $5.48 billion, marking an almost 73 percent decline since 2005.

The layoffs will come down over the next six months, although Falco told employees he's aiming to make decisions on all the domestic cuts by the end of March. The company will be consolidating offices in Mountain View, Calif., and Los Angeles, and will review its international operations to look for opportunities to cut costs.

Falco said AOL's focus remains on creating "mutually dependent publishing, advertising, and social media businesses."