Steve Case has a piece in today's Washington Post where makes a case (haha) for breaking up Time Warner, and in particular, taking AOL in a new direction.

I am not persuaded by Case's spin on the history of the Time/Warner AOL merger: neither is Om Malik. But his three reasons why an unfettered AOL could do better than a captive one are worth thinking about:

[from It's Time to Take It Apart]

Three initiatives, each grounded in AOL's storied past, could be the basis of the company's resurgence.

First, there is no firm better positioned to become the preeminent Internet-based phone company of the 21st century. With nearly 100 million instant messaging users, sending billions of messages each day, AOL is already one of the nation's leading communications companies. While I have respect for the talented entrepreneurs at Internet phone companies like Skype and Vonage, an independent AOL should be able to have many times the number of Internet phone customers as these upstarts (neither of which even existed when we announced the merger of AOL and Time Warner). While AOL is now, at long last, finally getting an Internet phone service off the ground, a spun-off AOL could make this its highest priority, without any anxiety about conflicts with Time Warner Cable (which offers competing services).

Second, given that AOL has always fostered a sense of community and encouraged interaction between like-minded people, it is well positioned to lead in the booming field known as social networking. Indeed, AOL was facilitating social networking before anybody called it that; now this is one of the fastest growing segments of the Internet, as shown by the surging interest in (and valuations of) companies such as MySpace and Facebook. There's no reason why AOL should be falling behind these new entrants -- except that, within a multibillion-dollar conglomerate, emerging opportunities are often ignored until it's too late.

And third, the current drive to make AOL.com a general interest portal is great, but the value of general interest Web sites may have already peaked. The bigger opportunities are likely in the area of vertical portals, Web sites that draw people into specialized channels about things like sports or health, and that host multimedia content as well as video search tools, which blur the lines between the Internet and television. AOL's huge audience gives it a tremendous advantage here, not just to sell ads, but also to build valuable, durable interactive media brands and franchises.

It is true that in each of these three areas, and many others, there are initiatives already underway at AOL. My point, however, is that AOL must go beyond merely "doing" these things; it must reach for leadership in each area. And to do that, it must be freed from its corporate shackles and return to its entrepreneurial roots, identifying ideas early and promoting their widespread acceptance.

Regarding AOL's instant messaging opportunities, I agree that the company could make a credible VoIP run against Skype/eBay, Yahoo, MSN, Vonage, and Google, based on the penetration of AIM. And Case is right, that AOL needs to focus on that right now, or the tide will have turned. The presumed internal conflicts with other arms of the media giant could in fact hold back necessary focus or resources. Given the innovation going on at the competitors and the ho-hum stuff being done in AIM today, something needs to happen.

Here's what I was writing two weeks ago in a review of AIM Triton, their newest version of AIM, that I never finished:

Until today, I had only peeked at the AOL Triton project from afar, but because of my increasing hostility to apps that only run on Windows, I still haven't really fooled with it. I did post Stewart Henshall's comments here, where he basically states that they failed to do very much that's innovative. A complete "lack of vision," he said.

So, after reading a lukewarm review in the Washington Post this morning, I fired up Virtual PC and downloaded the thing. (And, oh, by the way, reclaimed my longlost "stoweboyd" screenname! Years ago, when I dropped my AOL account, they appropriated my login and told me -- in various tech support interactions -- that I would never be able to regain it. This was a policy based (supposedly) on protecting people from others spoofing their identities after releasing screennames or login names. "But," I protested, "I am me. I am not spoofing." Tough luck. However, today, I was able to generate the "stoweboyd" screenname. Hmmm. Maybe its the statue of limitations has elapsed... whatever. But I am glad to regain it, and I plan to switch over to using it.)

My expectations were low, despite the hoopla about the new video capabilities being a Skype killer. Sure they are. What I expect is the increased commercialization of the AIM experience. More ads, more real estate devoted to pushing AOL services, and during the download and installation, all sorts of attempts to own my desktop. And they did not disappoint.

Couple that with the ongoing brain drain at AOL, there are obviously systemic problems, there:

[from WSJ.com - AOL Loses Executive Who Led Instant-Message Unit's Revival

The America Online executive who led a turnaround at the online company's Instant Messenger division has quit a week after AOL introduced its latest version of the product. Chamath Palihapitiya, 29 years old, plans to join a venture capital firm next year.

Mr. Palihapitiya's departure comes as AOL parent Time Warner Inc. is in the midst of negotiations to sell a minority AOL stake to either Google Inc. or Microsoft Corp. Those negotiations have been dragging on for months, leading to a sense of uncertainty among many AOL staffers. In August, Neil Smit, who was head of AOL's subscription business, became chief executive of Charter Communications Inc.

AOL hasn't named a successor to Mr. Palihapitiya, who plans to leave at the end of the year. He will join Mayfield Fund, one of Silicon Valley's most established venture firms, with $2.3 billion under management, as a principal in January.

Good news for Mayfield, perhaps, but another question mark about the future direction of AIM.

Case's arguments about social networking, or perhaps to generalize, the emergence of social architecture upon which interesting new apps will be built, are convincing to me. With gazillions of AIM and AOL users, AOL should be better positioned than they are today in that arena. And, despite the buzz around MySpace and Facebook, I think we are only seeing the start of a social application explosion. These are SNA 1.0 companies, and there really aren't any SNA 2.0 companies out there, unless you blur your focus and look at Flickr or Last.fm (obvious candidate to be acquired, soon, btw), where people are sharing their obsessions with media. AOL should be doing more, here.

And finally, the argument that AOL could become a leader in social media is a real possibility. It's a wide open marketplace, and the company recently acquired Weblogs, Inc., which is a serious step in that direction.

So, leaving aside the "who struck John?" arguments about how AOL got mixed up with Time Warner in the first place, and not even trying to dig into whether its good for the other parts of Time Warner to be divorced from AOL, I am willing to nod along with Steve's message. Whether he can make it happen, or happen quickly enough, I have no idea. But there is no doubt in my mind that a smaller, more focused AOL, capitalizing on AIM, and perhaps adopting my mantra -- The Buddylist Is The Center of the Universe 2.0 -- is a better play than whatever it is Time Warner thinks it is doing with AOL right now.