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Steve Case Made Sure To Put America Online by Alpha Team

In the late 1970s, a college student named Steve Case pondered ideas such as two-way television.

Inspired by a book he read, he enthused about the dawning of an electronic frontier.

Hardly anyone knew what he was talking about. "It just struck me as obvious that some day consumers would want to decide what they wanted to see and how they wanted to get it," Case said in a 2004 interview. Consumers would "not just be passive recipients sitting on a couch with a remote control."

For a while, these were nothing but Case subjects. One day, they would be the foundation of a company called America Online.

AOL "offered what people wanted," said William Halal, a management professor at George Washington University.

Case's firm would become the "de facto utility" for Web services, Halal said. "They taught people how to use the Internet."

Case grew up in an upper-middle class family in Honolulu. Steve and his brother Dan spent much of their time starting little businesses — selling greeting cards and newspaper door-to-door. Dan would become a successful investment banker.

After Steve Case graduated from Williams College in Massachusetts in 1980, he took the conventional route to a business career. He got marketing jobs at Proctor & Gamble — "a great marketing company," Case said — and then Pizza Hut.

But Case, still in his early 20s, hadn't abandoned his plans for interactive technology.

"Most people 25 years ago I think thought I was a little bit loony, but I just believed," Case told the Academy of Achievement in 2004. "And so I just kept pursuing that."

With help from Dan, Case got a job at a startup, Control Video Corp. in Northern Virginia. The firm figured video game users wanted to download games over phone lines.

One problem: Its modules didn't sell. Just as Case was starting his job, demand for Atari video games plunged. Control Video, he said, had a "wonderful product" but it was "really, really badly timed."

"I learned a lot about timing and how some things just have to be in the right place at the right time," Case said.

The product's flop nearly killed the young company. Yet Case stuck with the firm, later renamed Quantum, as it tried to recover. It struck a deal with Commodore, the maker of a popular personal computer — to offer its users online services. Customers paid a monthly fee to get news, games and chat delivered to their computers over a phone line. At first, its base was limited to several thousand users willing to embrace a cutting-edge product.

Case, now the firm's key salesman, camped out at Apple Computer headquarters to persuade that company to offer a similar service. The online network AppleLink was born. Case helped strike a similar deal with Tandy.

The online services were popular, but not runaway hits. By the late 1980s, the Apple partnership was faltering. Quantum realized it couldn't rely on partnerships with bigger companies. "We've got to figure out a way to be successful on our own two feet," Case said.

When Apple Computer ended its deal, Quantum needed a new name for its now-independent computer network. In 1989, Case sponsored a company contest and offered his own suggestion: America Online.

"Other staffers understandably derided it as hokey," author Kara Swisher wrote in "There Must Be a Pony in Here Somewhere," a book on the AOL-Time Warner deal. "But Case voted his suggestion the winner anyway."

Case also came up with ways to "add a friendly, more personalized touch to the service," Swisher wrote. Case attached voice files to America Online software. Soon users were hearing "You've got mail," which became so ubiquitous, it would become the name of Tom Hanks' 1998 hit movie.

By early 1991, America Online had 100,000 users. Later that year, rival CompuServe offered to buy the growing AOL for $50 million. Some company executives called it a fair offer, Swisher wrote.

Case saw it as a big mistake. He thought AOL was on the brink of revolutionizing how people communicate online. Case was so convincing, other employees threatened to quit. Company brass listened. The deal didn't happen, and by 1992 America Online made bold plans to go public.

The company worried Wall Street would think the 33-year-old Case, recently promoted to CEO, was too young. So he was demoted.

Even so, the firm had a hard time finding an investment banker to sponsor what some saw as a risky, unprofitable startup. Then a bank changed its mind, and on March 19, 1992, AOL offered 2 million shares of stock at $11.50 per share.

Investors piled in, rocketing the stock on an epic ride: up almost 1,000-fold in less than eight years.

In the meantime, Case took over again as CEO, and AOL spent big to attract customers. Disks containing the AOL software flew everywhere, mailed to millions of potential customers. The strategy worked. Users signed on by the millions.

But AOL's rise in the 1990s wasn't easy. Sometimes the service had too many customers. Users complained about busy signals and slow service. A one-day shutdown of AOL due to technical problems was front-page news in 1996. The firm struggled to make a profit.

Some said AOL offered a "dumbed down" version of the Internet. But this simplicity also seemed to be what attracted so many users.

"If you're doing something new you've got to have a vision," Case said. "You've got to stick with it, because these things are not overnight successes in almost all cases."

AOL bought up CompuServe in 1997 and Netscape in 1998. As money flowed toward tech stocks and Web startups, AOL attracted big ad revenue. The number of subscribers peaked at more than 26 million in 2002.

In 2000, just as the tech boom was at its peak, Case reached a deal to merge with Time Warner, one of the world's biggest and most famous media companies. Even though it owned cable systems, TV networks and national magazines, Time Warner would represent only 44% of the new AOL Time Warner.

The merged company didn't fare well. The tech bubble burst, and the AOL division lost money. The cultures of the two divisions clashed.

He resigned in 2003. Still, Case said, "AOL from a business standpoint has been a terrific success. The Internet is now taken for granted and really is part of everyday life, which 20 to 25 years ago people thought was science fiction."

Case, 48, has moved on to other efforts, driven by business opportunities and his vision.

He's the CEO of Revolution, a company that started in 2005 and, he said, seeks "transformative change by shifting power to consumers." The firm has a variety of initiatives, including a chain of resorts and an effort to use technology to improve technology.

That's on top of the Case Foundation, which he launched in 1997 and funds many nonprofit projects.

"Anything is possible," Case said, "but it starts with somebody having a dream and sticking with that through thick and thin."

BY BEN STEVERMAN

This article was published on Tuesday 26 September, 2006.
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