AOL's Frightening Eviction

There's a new Sam Raimi horror movie opening today, about a loan officer who evicts an elderly woman from her home and winds up with more than she bargained for when a damning curse is placed on her. Isn't the Drag Me to Hell plot pretty much what happened to Time Warner's (NYSE: TWX  ) AOL yesterday, only without the "I'm a Mac" guy in a supporting role?

After all, AOL is the aging tenant, being evicted by the number-crunching officers after it was unable to pay the rent. Either way, Time Warner's cursed.

Why did Time Warner take so long to finally unload AOL on its shareholders? AOL could have been worth so much more if Time Warner had only cut the cord earlier.

• It could have spun out AOL seven years ago, when America Online peaked with 26.7 million access subscribers. For that matter, it could have probably sold its access business to EarthLink (Nasdaq: ELNK  ) or United Online (Nasdaq: UNTD  ) before the defections mounted.   
• When Google (Nasdaq: GOOG  ) invested $1 billion to acquire a 5% stake in AOL four years ago, Time Warner could have cashed in on the implied $20 billion valuation.
• Heck, Time Warner could have even set AOL free a year ago, when it was posting growth in operating profits, as high-margin online advertising gains were offsetting the subscriber defections.

The only upside to cutting AOL loose now is that it has Google ad exec Tim Armstrong at the helm. That gives AOL a little more street cred as the fallen dot-com darling begins the long road back to redemption.

Other than that, AOL is stuck in the same concrete block as Yahoo! (Nasdaq: YHOO  ) . They're both pocketing a ton of properties that round up a boatload of traffic to hard-to-monetize pages. They're also both strong in display advertising, which is a poor man's paid search.

There is no easy fix. On its own, AOL may take a few more chances. It may absorb other traffic mongers, such as Ask.com parent IAC (Nasdaq: IACI  ) or domain-name collector Marchex (Nasdaq: MCHX  ) . It's going to have to do something to attract new investors, since organic growth has also been sadly evicted.

Want to see something really scary, Raimi? Try an AOL "Welcome" screen on for size, and see how long it takes to work your way up to "Goodbye."

Other access stories to access:

• Flowers for Your Classmates
• Time Warns, Errs
• It's So Much Worse Than You Think