January 14, 1999
A Look at Steve Case
CEO and Chairman of America Online
by Rick Munnariz (TMF Edible)
Stephen McDonnell Case, the boy who would grow up to lead America Online (NYSE: AOL) to cultural significance, did not start out as the charismatic marketing mogul of today. Steve was born on August 21, 1958, in Honolulu, Hawaii to Dan, an attorney, and Carol, an elementary school teacher. He was shy, the second youngest of four children, and experienced a relatively ordinary childhood, teaming up with his older brother to run everything from a limeade stand to a more ambitious magazine stand. Case Enterprises didn't make either brother rich, but it fueled the entrepreneurial fire in Steve at an early age.
His teenage years found him playing in rock bands and serving as the editor of his high school paper. Despite his reticent ways, Steve was enamored with the music industry and set his collegiate sights on the bright lights of California, where his parents first met. He ultimately opted for the other coast, his father's alma mater of Williams College in Massachusetts.
Steve majored in political science and it was there, in 1977, where he met Joanne. The couple dated on and off for eight years before finally tying the knot. By then Steve had already gone through a couple of entry-level jobs as an assistant brand manager for Procter & Gamble (NYSE: PG), dreaming up new pizza toppings for Pizza Hut, and a marketing manager stint for Control Video Corporation, a debt-ridden video game specialist.
It was out of the ashes of Control Video that America Online arose. Control Video was faltering, with creditors readying the battering ram. Few remained after necessary layoffs and Steve was one of the survivors, then the marketing chief by process of elimination. The company now centered on three desperate players. Jim Kimsey handled the finances. Marc Seriff handled the technology. Steve handled everything in-between.
The only thing knocking louder than the Control Video creditors was opportunity. Commodore was looking to start an online service for Commodore 64 users. The home computer maker was set to go with PlayNet, a colorful community-driven platform. Control Video got into the mix. It would license the PlayNet software and manage the service. Control Video paid off small creditors and offered the larger debt holders a stake in the new company, Quantum Computer Services. Quantum and its Q-Link dial-up network were born in 1985. The November launch was as quiet as could be expected for a service that would only be available during weekends and weeknights.
In the end, 1985 represented the start of stability. Steve and Joanne Case were married and Control Video was in business. Yet Q-Link struggled as few saw the Commodore 64 as a viable modem-based computer system. However, less than two years later, Steve had negotiated with Apple Computer (Nasdaq: AAPL) and Tandy (NYSE: TAN) to launch AppleLink and PC-Link, respectively.
By 1989 there were still only 75,000 users on the three services combined. Apple wanted out and paid the company $2.5 million for the right to eventually launch its own online service. In light of the rotten Apple, the company decided to consolidate its services under one brand. But which brand? After hearing suggestions for Quantum 2000, Explore, and Infinity, Steve opted for his own moniker -- Online America, ultimately switched around to become America Online.
As a Washington, DC, ad agency drew up the early version of the now familiar triangular logo, the company emerged as a spunky underdog in the online world. Running counter to text-based behemoths CompuServe, GEnie, and Prodigy, America Online provided a user-friendly interface that was easier on the eyes. Its burgeoning popularity did not go unnoticed, as CompuServe sought to buy out the upstart for $50 million in 1991. Case and Kimsey found the price tag tempting, especially since the company was in a cash crunch, but ultimately refused the offer. Steve saw bigger things ahead.
America Online refused the CompuServe dowry, but still needing to raise capital it sought to go public. In 1992 the company did just that, although it was not an easy sell. Alex. Brown balked when it was first approached, but eventually served as the lead underwriter along with Robertson Stephens. Half of the shares sold in the initial public offering were from insiders.
Case, who all intents and purposes ran the show,was taken aback when the company's board suggested that the seasoned Kimsey be named CEO. Three years later Kimsey would step down and Case would serve as both CEO and Chairman of the Board.
Over time the company grew while its competitors faded away. Renewed attention was unavoidable as Microsoft (Nasdaq: MSFT) cofounder Paul Allen and then even Microsoft itself presented Steve with buyout offers. America Online resisted and moved forward, hitting subscriber milestones exponentially. Times were good for the company but not so good for Steve's family life. His relentless work ethic, coupled with an in-house indiscretion, caused a rift in his marriage. After three children and eleven years of matrimony, Steve and Joanne were divorced.
On August 7, 1996, America Online's then six million subscribers weathered a 19-hour service outage. What at first fueled media and consumer ire soon inspired the company itself. The fact that a simple operational flub became a headline-grabbing episode spoke volumes of the importance of the online experience. That was just the way Steve envisioned it. A quote in his America Online user profile reads, "we're all pioneers in building this new interactive medium, which someday will be as important as TV or the phone." Indeed. Sixteen months later when a move to flat-free pricing found busy signals jamming the modem lines, Steve was able to yet again effectively spin the incident as consumer obsession with America Online.
Wedding bells eventually rang louder than busy signals as the company acquired the online services division of the same CompuServe that was once so set on buying America Online. Steve too remarried, to Jean Villanueva, the company's former head of corporate communications.
While the executive faces around him have changed during Steve's tenure, the company has grown consistently. Today America Online boasts 15 million subscribers. While the company sought to differentiate itself from the commerce-intensive Prodigy by emphasizing community, it has been a raging e-tail success as the gateway to more than a billion dollars worth of holiday sales this past season. The same company that Steve was considering to sell to CompuServe for $50 million, eight years later is now worth more than $50 billion.
Case Enterprises didn't turn out too shabby after all. And to think it all started with a limeade stand, apparently rich in sugar.
A Steve Case interview request to America Online went unanswered. The information for this special was obtained from various sources, chief among them Kara Swisher's aol.com, a great read on the history of America Online.