Wed10222014

AOL founder Steve Case discusses secrets to success at MV museum

Before launching America Online, co-founder Steve Case was in charge of developing hair conditioner for Procter & Gamble and pizza toppings for Pizza Hut. Those stints in marketing and product development paved the way for launching an Internet service that became an industry giant, audience members learned Jan. 12 at an event hosted by the Computer History Museum in Mountain View.

When Case took the stage in conversation with Wall Street Journal columnist Walt Mossberg, he divulged some insights into how he built a Fortune 500 company that industry experts doomed to failure in the 1980s.

Case said that in college he became fascinated with the idea of an online interactive computer network, but at the time the idea was considered science fiction. In 1981 he went online with a K-pro computer and a modem.

"It was slow," he said. "There wasn't much there. It was basic stuff. But you could tell something was bubbling to the surface. There was something that confirmed to me this would be a big thing."

In 1985 he co-founded Quantum Computer Services, and later became the company's chief executive and chairman. Quantum Computer Services changed its name to America Online (AOL) in 1989.

At that time, two multibillion-dollar companies, Prodigy and CompuServe, were the "big guns" in the industry with millions of customers. Case felt online service needed to be more fun, useful and accessible, and vowed to take them on.

"We really did believe we had a better mousetrap," he said. "But the problem was getting the word out."

In the late 1980s, his company partnered with Apple to develop online software, but the alliance blew up around 1989 over software distribution. Case wanted it to be free to build a subscription base. He launched AOL the same year, and its membership continued to increase through the 1990s. The subscription base went from 187,000 members in 1992, when the company went public, to 15 million in 1998. In 2000 AOL merged with Time Warner.

One change that spurred the growth of AOL in the 1990s occurred when Case convinced IBM to create computers with built-in modems. Before that, few private computer owners had modems, so they were unable to logon to the Internet. Once other computer makers followed suit, the modem became a standard communication device and AOL's membership took off.

Other aspects of AOL that attracted customers were chat rooms and Instant Messenger. AOL did not invent chat rooms; it made them easier to use and grouped them in logical topics, Case said. AOL did invent Instant Messenger and Buddy Lists.

"It took nine years to get 1 million members," he said. "The next 1 million took nine months."

AOL survived its busy signal problem of the mid-1990s, when its servers couldn't handle the number of members logging on; and warded off competition from Microsoft. It is now the world's largest Internet company.

AOL's merger with Time Warner did not prove fruitful, and the two remain separate entities, working independently. After the merger, Case stepped down as chairman, but he continues to serve on Time Warner's board of directors. He said he enjoyed the first 10 years of building the company the most.

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