Does AOL Matter?

Rumors are circulating that Time Warner's (NYSE:TWX) AOL division is gearing up to take on News Corp.'s (NYSE:NWS) wildly popular My Space social-networking site. Marketwatch took the speculation to task yesterday, rightfully pointing out that the rumor seems to have been played up by AOL's recently acquired Weblogs, Inc., after it was initially cited on the Scripting.com blog.

I'm not going to play detective here. Whether or not AOL really does have a social-networking service to roll out in two weeks isn't really the issue. Will this even matter? Does AOL still have the brand allure to make it work? Few companies can pick out a hot trend, point in its general direction Babe Ruth-style, and expect an immediate home run. I'm looking over that shortlist, and I don't see AOL there.

Blogging is huge. AOL Journals is not. Even areas where AOL had a respectable head start, like Internet services and online chat software, were eventually overtaken by broadband providers and Skype, respectively.

Can a company that has suffered quarterly net defections to its flagship online service for three years now really expect to compete with the fastest-growing site in recent memory? Companies like Yahoo! (NASDAQ:YHOO) and Google (NASDAQ:GOOG) have acquired smaller sites with a social-networking bent, but they know their place. What can AOL bring to the table to make MySpace.com tremble with obsolescence?

The allure of unsigned bands setting up virtual street teams for promotional purposes made My Space stand out against social-networking pioneers like Friendster and Tribe. One can argue that music is part of AOL's appeal -- especially considering its music-streaming deal with XM Satellite Radio (NASDAQ:XMSR) -- but this is the same Time Warner that also unloaded what is now Warner Music Group (NYSE:WMG).

Last year, AOL cut the cord on the services that truly helped it stand out from the pack, like its nifty newsgroup reader and speedy message boards. The cuts were part of its move to offer its content to the outside world through AOL.com -- but just because something is available, that doesn't make it valuable.

I couldn't care less if AOL takes on My Space. The only real puzzler, assuming the rumor is true: How does AOL expect to sway the masses from the platforms that they already use and trust? Leaving America Online is easier than leaving MySpace.

Then again, if AOL wants to dream big, why don't we go ahead and start a rumor that AOL is about to take on eBay (NASDAQ:EBAY) for world supremacy in online auctions? After watching dot-com winners like Yahoo! and Amazon.com (NASDAQ:AMZN) try and fail on that front, I wouldn't give AOL much of a chance there, either.

Amazon, Time Warner, and eBay are Stock Advisor recommendations. XM Satellite Radio was singled out last year to Rule Breakers subscribers.

Longtime Fool contributor Rick Munarriz may still give AOL the benefit of the doubt here, but he thinks that even AOL realizes its smaller role online these days. Rick does not own shares in any of the companies in this story. The Fool's disclosure policy is on everyone's buddy list. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.