The CEO of newly-independent AOL, Tim Armstrong, knows that AOL’s future is not its past. But that doesn’t mean AOL can’t recapture some of the glimmer it’s lost over the years.

In an effort to accomplish that, Armstrong is changing AOL’s its focus by, well, getting focused.

In an interview with CNBC, Armstrong explains that he’s in the process of turning AOL into a niche media company. As transcribed by TechCrunch:

And we– like to say here we’re building the world’s largest niche, you know, media business. And niche meaning at scale. We wanna have a lot of properties with a lotta users on them. And then, the second piece is really that fragmentation is our friend. As the internet becomes more fragmented, when– if you can produce great content in niche areas and then really leverage the distribution on the internet, you’re looking at a very high scale, high ROI, return-on-capital business.

Already, AOL has been building out niche websites and blogs, and it just lured tech writer Saul Hansell away from the New York Times to head up, AOL’s new content management platform.

There’s a lot to like about Armstrong’s vision for AOL. I’m a huge fan of niches and frankly think that many entrepreneurs in the consumer internet space ignore realistic opportunities in specific verticals in pursuit of unrealistic dreams in larger markets. But niches can offer compelling advantages. One of the biggest: endemic advertisers. Forget about behavioral targeting, for instance. Contextually relevant ads are far more popular with consumers and when you have traction in a particular niche, selling endemic advertisers is often far easier than trying to sell advertisers on your demo.

Given all this, AOL’s new direction makes a lot of sense. But that’s not to say that it’s guaranteed to deliver success. Niche is hard to do at scale. One of the big reasons: niche success generally requires passion and authenticity. If you start a website about soccer, for instance, chances are you’re going to have a hard time gaining traction if you’re not visibly passionate about soccer.

And that’s where I worry about AOL. A big part of its strategy appears to be centered on, which has drawn comparisons to Demand Media and Associated Content. In short, it relies on freelancers to produce content that AOL can then use syndicate throughout its network. That’s fine, but as Kate Kaye of Clickz recently pointed out, “AOL’s efforts to solicit new freelance contributors to help fuel its data-driven
editorial project seems at odds with its stated intention to equate the AOL
brand with high quality content

Indeed, a freelance writer being paid $20 to write a blog post about, say, Twilight New Moon, is unlikely to produce the type of content that you’ll find a true Twilight fans writing. That’s not to say that AOL won’t be successful in building traffic (especially through SEO) and profiting, but there’s a huge difference between ‘niche media company‘ and ‘content mill‘.

As Armstrong gets under way with his master plan, how will we know which one AOL is? It’s all in the traffic. If much of AOL’s traffic consists of hit-and-run visits primarily from organic search, we’ll know AOL has become a content mill. If there’s evidence that AOL is building loyal readership and community around various verticals, we’ll know that AOL has become a true niche media company.

Personally, it’d be far more enjoyable to see the latter.

Photo credit: psd via Flickr.