AOL.com: How Steve Case Beat Bill Gates, Nailed the Netheads, and Made Millions in the War for the Web

AOL.com: How Steve Case Beat Bill Gates, Nailed the Netheads, and Made Millions in the War for the Web

by Kara Swisher

Paperback(1 ED)

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Product Details

ISBN-13: 9780812931914
Publisher: Crown Publishing Group
Publication date: 07/01/1999
Edition description: 1 ED
Pages: 400
Product dimensions: 5.24(w) x 8.00(h) x 0.86(d)

Read an Excerpt

the canary in the coal mine

        The truth is: nobody knows.
        And, because most often they do not know that they do not know, no one will ever tell you that truth.
        Some people don't know because they are too hopeful and sometimes because they are very greedy. Some are profoundly stupid or are a little too smart.
        But in the spanking new world of the Internet, nobody knows because everyone and everything has just been born.
        Which is why Steve Case found himself on May 8, 1997 cruising on the calm waters of Lake Washington in Seattle on a boat carrying him and more than 100 other chief executives toward the 20,000-square-foot, $40 million home of Bill Gates.
        Case was definitely not supposed to be there--if you had
paid heed over the years to a variety of learned Wall Street pundits, savvy journalists, pontificating technology consultants, and waspish naysayers in Silicon Valley. And the computer online service, America Online Inc., which he had built into the world's largest, was just one tiny step away from falling right over the precipice.
        The dirge had been endless: AOL was nothing. AOL was history. AOL was dead.
        Yet there Case stood--perhaps the liveliest corporate corpse one might ever meet--chatting with American Airlines head Robert Crandall, kibitzing with a cadre ofMicrosoft's top executives, and joking with Vice President Al Gore.
        In the near distance, in Bellevue, Case could just make out the outlines of Gates's glass-and-wood palace, still being built on the lakeshore, where an elaborate dinner awaited them. Getting to see the famed technological Xanadu that Gates was constructing for himself was the highlight of a flashy, two-day CEO "technology summit" Microsoft had organized. There had been speeches all day. Now a dinner of spring salmon, fiddlehead fern bisque, and tortes with Rainier huckleberries awaited them.
        As the boat wended its way from its launching point on Lake Union, surrounded by a flotilla of security boats to protect this small ship carrying very powerful people, to the place Case jokingly was calling "Bill's San Simeon" (after William Randolph Hearst's egotistical monument to himself), the man from AOL thought it was all just a little too bizarre.
        He was happy to have been invited, of course, but felt decidedly out of place. He had quipped to Microsoft finance chief Greg Maffei and other executives from the company that he felt like a spy deep in enemy territory. He ribbed them, asking playfully if he should be taking notes on any stray Microsoft secrets he could glean, and sending them off in a bottle over the side of the ship. But inside his head, he wondered seriously: Should he even be here at all, still standing? Had it only been four years ago that Case had been told by Gates that it was probably the end for AOL?
        Gates--whose leadership of Microsoft and ensuing vast wealth had made him into an American business icon on the level of John D. Rockefeller--had been spectacularly wrong.
        After the talks between them in 1993 had led nowhere, Gates had created his own online service as he had promised. But, in two years of trying and after hundreds of millions of dollars were spent, Gates's Microsoft Network had not bested AOL. With AOL now four times as large, it had not even come close.
        No one had-yet.
        This much was true: in the last decade of the twentieth century, an entirely new medium--online communications via the personal computer--had been born. It was being hailed as the next great technological innovation, in the same league as the telephone, the radio, and television.
        Few times in American business history has an entire industry been created from almost nothing and captured the attention and imagination of millions of consumers, setting off a titanic clash for money, power, and dominance among some of America's greatest businesses. But such has been the case with the Internet and the online services industry since its mainstream emergence at the start of the 1990s. And of the many companies vying to create empires in cyberspace, there was now none better known than AOL.
        In much the same way that Coca-Cola had become the name most people associated with sugared soda, the brand of this emerging new medium had turned out to be AOL. Since its founding only ten years before, the company had grown from a dinky computer games service aimed at teenage boys into a huge business with more than $1 billion in revenue. It had become, in the process, the way most Americans reached the Internet. With nearly ten million subscribers worldwide, its "circulation" was much larger than that of any of the major newspapers in the United States.
        Yet it was also a company in constant danger. Innumerable challenges had given AOL a heart-rending roller coaster ride all along the way, and many observers had long predicted AOL's imminent demise. In 1993, they claimed that AOL was too small to compete with CompuServe and Prodigy (online services backed by big bucks from major U.S. corporations). AOL was too glitchy and simplistic to catch on with consumers, they opined in 1994. AOL was vulnerable to a withering frontal attack from Microsoft, they declared in 1995. AOL was going to really get knocked flat by the growing popularity of the Internet's World Wide Web, they announced in 1996. And finally, in 1997, they could say with absolute assurance, AOL was going to be its own executioner, shooting itself dead with a dizzying series of corporate missteps.
        And there were so many other AOL killers: the telephone companies, with their advantage in all things wired; the media conglomerates, with their abundant content; the scrappier Internet service providers, with their low prices.
        Beginning in the spring of 1996, the punches came hard: a precipitous stock drop that had cut AOL's market value by two-thirds; the increase of an online trend called "churn" that signaled dangerously restless customers; the embarrassing departure, after only four months, of a top executive brought in to discipline AOL's free-wheeling culture; another drastic restructuring of the corporate body and business plan; a restating of financial results that wiped out all the profits AOL had ever claimed it made; a shift in pricing that caused subscriptions to surge, but resulted in seriously blocked access for users; and one lawsuit after another over pricing, access, and stock value.
        Case, who had come to personify the company, had been called sleazy, a soap salesman, a liar, a fool.
        But he was still there. Case, in fact, had turned out to be the Rasputin of the Internet, with no one able to deliver the long-expected deathblow. All the nicknames AOL had acquired over the years had the exact same theme: the cockroach of cyberspace, the digital Dracula, the Lazarus of the online world.
        "Someday, the history of cyberspace will be written as a chronicle of the predictions of AOL's demise," Wired Magazine had written once. "From claims that America Online would fail because it wasn't 'open' to charges that it was inherently unreliable, the service has been a canary in the coal mine of cyberspace."
        By the spring of 1997, AOL's stock was up again to double its price during the summer and fall doldrums. Member numbers were moving slowly toward the golden 10 million mark, and the company had reported a small profit--a development that had taken off some of the pressure from Wall Street.
        But, as always, new rumblings were beginning to surface. With a new flat-rate pricing offering, AOL would not be able to attract advertisers who would yield the sustained profits needed to pay for its burgeoning costs. AOL would not be able to grow as fast as it needed to, because new consumers were becoming harder to find. AOL's proprietary design language would hinder its ability to attract much needed popular content that was flocking to the Web. And even this: AOL's new service head, MTV founder Bob Pittman, whom Case had recruited, was going to stage a corporate coup and displace Case at the top.
        AOL was nothing. AOL was history. AOL was dead.
        At the CEO conference that day, Bill Gates had talked of the importance of ensuring the excellence of a corporation's "digital nervous system."
        "The meetings, the paperwork, the way information workers are organized, the way information is stored--it's my thesis that, with the incredible advances in technology, it's now possible to have a dramatically more responsive nervous system," Gates had opined.
        If that was true, if you listened to all the noise, AOL's nervous system was suffering from an acute case of hypertension. But you couldn't tell that from Steve Case, a man whom his employees had taken to calling "The Wall" because of his ability to exude an otherworldly calm and have virtually no reaction to a wide variety of pressures. He was, in fact, a deeply shy man, not given to small talk and schmoozing--unusual traits, given that he was squarely at the forefront of the newest communications revolution. But his nonchalant style had given Case a reputation of aloofness and of haughty arrogance in the online world.
        But in Case's own head, another mantra had been playing for more than a decade, masking out all the cacophony of complaints.
        Over and over again; it said: AOL would be everywhere.
        Someday, somehow, Case dreamed, his service would be in America's dens, living rooms, kitchens, offices, and malls. And the elitists who ran most Internet companies--the doubters of this singular vision, the ones who told him he was going down so many times--they always had been wrong and they would be wrong once again.
        How did Case know all this?
        He didn't.
        Nobody did.
        But as he floated along on that sunny Pacific Northwest evening, the imperturbable Steve Case knew one thing for certain.

        The ride had just begun.

Interviews

An Interview with AOL.COM Author Kara Swisher About "The Deal of the Century"

The astounding announcement that America Online plans to acquire Time Warner has journalists across the land calling this proposed union the "deal of the 21st Century." Perhaps no journalist has more insight into this mega-merger than Kara Swisher, Wall Street Journal reporter and author of the acclaimed work aol.com: How Steve Case Beat Bill Gates, Nailed The Netheads, And Made Millions In The War For The Web. bn.com business editor Amy Lambo recently talked to Swisher about this unprecedented week in business.

bn.com: If you were to write yet another afterword to AOL.COM in lieu of this week's headlines, what would the title of that afterword be?

Kara Swisher: I think the title would be: "Maybe Steve Case Is Smarter Than You or Me."

bn.com: At one point in AOL.COM, you describe Case as a "blank slate" who can easily be perceived in the way various individuals want to perceive him. Will he be able to maintain this quality and stay immune to the caricature treatment that is so often given to other media figureheads like Gates or Turner?

Kara Swisher: It will be really interesting because he is such a cipher for so many people. He's very shy and doesn't much let on what he's thinking. That hasn't changed. In fact, I think he's become more remote since he's gotten more famous. Although personally, when you deal with him one-on-one, he's charming, interesting, and has a very dry wit. I would also describe him as one of the more cynical people that I've ever met. It's not a negative cynicism. It's more of a reality-based cynicism. At the same time, I think that he's understood his role a little bit more -- that he serves as an iconic figure more than he used to. Although, you'll notice that you don't think of him immediately when you think of AOL, the way you think of Bill Gates when you think of Microsoft or Ted Turner when you think of CNN. Case is not the story. AOL has always been at the forefront of everything, and I think it's been a good idea. One of the issues a lot of AOL executives have with him -- they call him "the wall" at AOL -- is that you never know what he's thinking. I think that will probably annoy media people who are really into a "Do you like me? Do you really, really like me?" kind of thing. He will never let you know whether he likes you or dislikes you. I spent more time with him than anyone else and I can't say I know him very well. When you write a book, you try to figure out what motivates people, and in the end, I wasn't always clear what motivated him. [I concluded that] he just does what he wants to do and isn't governed by ego or wanting people to love him.

bn.com: What key factors or turning points would you point to in AOL's brief history that have put it in a position to acquire a behemoth like Time Warner?

Kara Swisher: I think they've wanted to do this for many years, at least Steve Case has. I've repeated this many times: When I met him, he said AOL was going to be the biggest media company of the 21st Century, and this was when they were very small. At different celebrity events that I've attended with him, he always said he was going to own this stuff. He's an avid magazine reader. He's very much a big watcher of television. I think he's very aware. He's always been very interested -- in ways that technology people often aren't, necessarily -- in television, movies, and magazines. One key turning point goes as far back as 1995, when they brought Ted Leonsis into the company. One of the first things Ted said was, "Our competition isn't technology. It's Jerry Seinfeld," meaning the time people are going to spend watching television versus AOL. They've always seen AOL as a media institution rather than a technology. Another key factor is stock price. AOL had the momentum and Time Warner didn't.

bn.com: You discuss the Microsoft-AOL rivalry extensively in your book and predict that "Microsoft is the company that AOL is most likely to tangle with in the future." Does this mega-merger reconfirm your prediction?

Kara Swisher: The other day I asked Steve Case, "Who do you consider your biggest competitor?" He said Microsoft. Microsoft is the company with the money and the market cap to do something, whatever they do. AOL clashes with Microsoft in a variety of areas -- technology, Internet access, influence. If AOL is successful and gets a lot of control of the interactive usage, they can sit right on top of Microsoft. I don't know what they're thinking at Microsoft, but I know there's not a great deal of friendship between Bill Gates and Steve Case. I think they have to be wondering where they fit. Microsoft could just become the supplier of technology to all of this, which I think they've been moving towards. I think their current president Steve Ballmer, who is really taking over that company, has no interest in becoming a media company. I perceive that. I think he's looked at the money they've lost and thought, "well, we could have used this money to do something else."

bn.com: So does all of this mean you're going to write a sequel to AOL.COM?

Kara Swisher: I think AOL will have to be in the next book that I write, but it's going to be about all of them. It's not just about AOL, it's about the whole media universe changing, the universe of media and technology intersecting in really interesting and unusual ways. I think there are certain other high tech companies that are definitely going to be players. Yahoo! is fascinating to me as a company. AT&T can't be counted out. Of course, they'll obviously play a big role since they have most of the cable systems in the country. I'm a little dubious about what Excite@Home can do. There's definitely CBS-Viacom and Disney. Even though Disney's stock is still in the basement, they certainly still own a lot of content that's valuable. They still own Mickey Mouse.

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AOL.com: How Steve Case Beat Bill Gates, Nailed the Netheads, and Made Millions in the War for the Web 5 out of 5 based on 0 ratings. 1 reviews.
Guest More than 1 year ago
AOL.com is one of the better books I've read the not only tells about the birth of AOL but the birth of the whole Internet revolution. The author, Kara Swisher is a superb writer that uses great writing techniques to describe and explain the setting, importance and mood of whatever she's writing about. If your interested in the history of the Internet or AOL or even both this book is a definite must.