The problem is that it also misrepresents the activity of the site - because someone who looks online might not have been online for 59 minutes.
I find it interesting that the newer gen of platforms (Discourse etc.) simply do away with making this particularly obvious; there's no online marker shown in thread, I'm not even sure you *can* see who's online in a Discourse, it only wants to show me last post time on the little popup profile, and while you can get last online for an individual in their full profile, there's no convenient summary of who's online right now, and I suspect that's for the best.
On the one hand there is the 'oh no, people aren't online, the site is dead', but the other is... if you don't tell them, they can't jump to that conclusion. And instead will have to look at the content. Of course, if you're not producing regular new content (but constantly have people online) that's *also* not a good sign.
It's similar to how in the olden times we had 'Most people online was x on abc date' - if that date was in the recent past, it's fine, but if that date is a year or more ago, and it's way out compared to other stats (e.g. online right now 100, most online today 200, most online ever 5000 10 years ago), it's usually a sign that things are in decline. Better to not advertise that situation - but of course, this is why Discourse etc. *doesn't*.
It is a distraction from the content.