Steve Case: He knew what people wanted

By : |January 12, 2001 0

NEW YORK: To Steve Case, the customer always comes first.

That was his credo when he ran a juice stand in Hawaii as a kid, and later
marketed pineapple toppings for Pizza Hut or while developing his Internet
service provider America Online into such a giant that it could eventually buy
out one of America’s media institutions, Time Warner Inc.

At the combined company, AOL Time Warner, Case will turn in his AOL chief
executive hat to be chairman of the new media powerhouse.

The ability to gauge public tastes and demands was never more evident than
five years ago when Case predicted that by 2005, AOL would be as big a force on
the Internet as Microsoft was in software.

Everyone laughed, including Microsoft supremo Bill Gates, who once told Case:
“I can buy 20 per cent of you, or I can buy all of you. Or I can go in this
business myself and bury you.”

No one is laughing now that AOL is on the verge of closing its union with
Time Warner, valued at about $106.2 billion on Thursday, making Case the
undisputed king of the Internet, years ahead of schedule.

And yet despite his brash prediction, Case, 42, is no egomaniac.

He has about $1 billion in AOL stock, but he often eats in the company
cafeteria where he is said to be especially fond of the turkey sandwiches and
Sun Chips. He defines “office casual” with his usual garb of jeans and
sports or Hawaiian shirts.

The sight of Case and Time Warner chief Gerald Levin announcing their merger
last January was a contrast in styles. Few could remember the last time they saw
Case wear a suit, and almost no one could remember seeing Levin out of one.

Case owns a modest home outside Washington, D.C., where he lives with his
second wife, Jean, and five young children.

The key to his success has been in understanding how an existing technology
could affect ordinary people, making that idea accessible to a mass audience,
and then marketing it.

“Right now, there is too much focus on the technology and not enough on
the consumer,” Case once said.

He caught the business bug early, selling lemonade, magazines, and plant
seeds with his brother Dan as a youngster in Hawaii. He also wrote rock music
reviews for his local paper to get free records and concert tickets.

Third wave
And even though he majored in political science at the prestigious Williams
College – where he sang in two new-wave rock bands – it was not government or
law that became his calling, but marketing and advertising. His focus became
clear after reading “The Third Wave” by Alvin Toffler, a book about
what an interconnected society might look like.

After graduating, he worked at Procter & Gamble in Cincinnati for two
years as a brand manager marketing, among other things, home-permanent kits.
Cincinnati was one of two cities in the country that were part of an experiment
in interactive television, Qube, which was being test-marketed in a joint
venture of Warner Bros. and American Express.


It was a crude system, but Case was enchanted by the possibilities. By 1982,
when he had moved to Kansas City to develop ideas for Pizza Hut toppings
(pineapple was one of his winners), he was already online.

"There was something magical about being able to sit at home in Kansas
City and talk to people all over the world," he said. "It wasn’t a
great leap of faith to think that if you made it affordable and easy to use,
people would want it."

Case’s passion grew into Quantum Computer Services, which he started in 1985
with two colleagues. It designed custom online offerings for the new crop of PC
manufacturers like IBM, Apple, Commodore, and Tandy.

In 1991, Case decided to mass-produce software for everyone and changed the
name of the company to America Online, which went public in 1992.

But he had trouble explaining to people what the company did. "It was
hard. People didn’t quite get it," he told US News. Then, when they did
understand, they immediately counted AOL out because giants like Microsoft,
AT&T, and News Corp. were getting in the business.

Case made blunders along the way. In 1994, when the Internet was taking off,
he was slow to incorporate a good browser into AOL’s software. Two years later,
he got in hot water with investors because of accounting irregularities.

And when AOL moved to flat-rate pricing, it was unprepared for the spike in
demand. Customers couldn’t dial in, their e-mails weren’t getting delivered, and
there was no one to answer their questions. Regulators forced the company to
offer refunds.

But with the help of Bob Pittman, his president and one of the founders of
MTV, Case righted the ship. The number of subscribers grew and advertising
revenue began flooding in. And investors, consumed by the mania for all things
Internet, flocked to AOL shares.

By the end of 1999, the stock traded at 10 times the price it had been in the
fall of 1998, giving Case the resources to do the once unthinkable – buy Time

(C) Reuters Limited 2001.

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