Small Town Focus to Make AOL Future Giant: CEO Armstrong

If a stock could ever be compared to a fallen giant it's AOL .

The company behind the ubiquitous “You’ve got mail” slogan was once among the most lauded firms to emerge from the Internet revolution.

But the company’s fortunes took a sharp turn for the worse after AOL acquired Time Warner in 2000.

A decade later the mega-merger was widely considered one of the biggest missteps in memory; on a par with New Coke and the Ford Edsel.

“It was one of the worst mergers in corporate history,” admits CEO Tim Armstrong.

And now, two years after AOL separated from Time Warner, investors are eager to understand what AOL’s game plan is for the future.

Armstrong tell us the company is making a big bet on creating and leveraging community specific content – something referred to as hyper-local.

“Almost every partner we’ve met with wants to drive local partnerships,” says Armstrong. “86% of commerce is done locally.”

And he says AOL’s investment in Patch.com reflects that commitment.

“In two years Patch.com has gone from being nowhere on the Internet to being the number 4 property,” – that is the number four ranking site among local-regional online properties.

According to comScore, Patch at No. 4 trails only behind Yelp (No. 1), CityGrid (No. 2) and Yahoo! Local (No. 3.) Patch is ahead of CBS Local (No. 5.) (Patch is made up of over 800 sites)

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“We’ve just started to monetize Patch this year,” says Armstrong. AOL’s board, management and advertisers all consider Patch a strategic aspect of “building a valuable business for the future.”

And Armstrong hopes the strategy convinces investors that AOL is a stock to buy and hold for a long time to come.

Unfortunately, from her comments, we don't think Armstrong convinced trader Karen Finerman to pull the trigger. “Call me crazy but just don’t love their declining cash flow over many, many years. I just can’t get behind it,” she says.

CNBC Contributor Ron Insana calls AOL a "tough" read. Either they're skating to where the puck is going - like a strategic hockey player - or the world has passed them by. We'll find out in 3 years whether this stock was a great investment at current levels.

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Traderdisclosure: On Jan. 11, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Terranova is long VRTS; Terranova is long IBM; Terranova is long LQD; Terranova is long CSCO; Terranova is long AXP; Terranova is long NFLX; Terranova is long APC; Terranova is long OXY; Terranova is long TRLG; Terranova is long MUB; Terranova is long SU; Terranova is long EMC; Terranova is long SBUX; Terranova is long DECK; Terranova is long CSX; Terranova is long SJM; Terranova is long XOM; Terranova is long JNPR; Terranova is long PNC Feb. $60 calls; Terranova is long WFC Feb. $29 calls; Finerman owns AAPL; Finerman owns BAC; Finerman owns JPM; Finerman owns IBM; Finerman owns MSFT; Finerman owns LIZ; P. Najarian is long AAPL; P. Najarian is long BAC; P. Najarian is long C; P. Najarian is long JPM; P. Najarian is long NFLX calls; P. Najarian is long INTC; P. Najarian is long YHOO; P. Najarian is long MSFT; J. Najarian is long WLT call spreads

Win Thin
No disclosures

Dennis Gartman
Gartman long Treasuries
Gartman is long SPY
Gartman is long copper
Gartman is short Euro

Tim Armstrong
No disclosures

Brian McGough
No disclosures

Bonawyn Eison
No disclosures

CNBC.com with wires.