Time Warner property AOL is laying off 700 employees — 10% of its workforce — according to a company-wide memo sent by AOL CEO Randy Falco.

Falco also expressed the need to "forgo merit pay increases in 2009."

Kara Swisher of All Things Digital broke the news and has the complete memo.

In early January, AOL reported an online advertising decline of 18% between 2007 and 2008.