With its ad business struggling and the merger with Yahoo only a wispy possibility, Time Warner's AOL has decided to focus on one of AOL's few strengths: online publishing.

Specifically, it will take advantage of the popularity of its niche content sites, which range from branded destinations (e.g. AOL Music) to less obvious properties, like celebrity-focused TMZ, men's fashion hub StyleList.com, and Moviefone.com.

These content sites attract about 70 million unique monthly visitors and counting, with pageviews up 40% and engagement up 20% in the past year, ClickZ wrote.

AOL shall continue developing its publishing unit, dubbed MediaGlow, to capitalize on the growing fragmentation of the web. Other companies, like Gawker Media and Slate, successfully created a series of blogs/online publications, each with their own domain and specific demographic.

The new division is the "third leg" of AOL's business model, joining ad sales-focused Platform A, under which its American and European ad offerings were consolidated; and People Networks, which oversees communications and social assets, including AOL Instant Messenger and Bebo.

In addition to rejiggering existing sites, AOL plans to introduce 30 new sites in 2009, using a low-cost, niche-market model. (Apparently favoring this model, it launched a handful of niche publications in May 2008 as well.) Potential topics are reality TV, horror films, children's pop culture, and jazz and heavy metal music, according to the release (via All Things Digital).

The resources devoted to the project include new studios in New York and Los Angeles, several hundred staffers, and at least a thousand freelancers. EVP-Programming Bill Wilson will serve as fearless leader.

"We're really focusing on editorial voice […] and we are focused on creating as many relevant starting points as possible," Wilson said, positioning the move as part of AOL's "total reinvention of the company."

But almost all AOL's existing niche sites depend on the flagship AOL.com to drive traffic to them, writes Silicon Alley Insider, citing Hitwise metrics for some of the sites, including three of the six cited in a New York Times article as fairly independent of its parent portal.

Engadget and TMZ, which respectively serve a cult audience of tech geeks and celebrity gossip-mongers, do not rely on AOL.com for traffic, but most of the 75 others do. "Take away the traffic from AOL.com and these sites will die a quick death," one commenter dourly observed.

Time Warner spent much of 2008 trying to figure out what to do with AOL, which has been a deadweight for the company since its internet-access business went into freefall several years back.

This week, following "disappointing" ad sales, Time Warner was forced to take a $25 billion writedown on the value of its cable system, publishing, and internet assets. The company also reported its first annual loss in six years.