Peter Kafka

Recent Posts by Peter Kafka

Revolution CEO Steve Case at D8: AOL Could Come Back–Look What Happened to Apple

Steve Case

Steve Case is most famous for building America Online, which became the Internet’s first mega-company, and for merging it with Time Warner (TWX), which became the worst corporate marriage in recent history.

But AOL (AOL) is 25 years old, and the AOL-Time Warner deal is a decade old. What has Steve Case been doing since then?

Investing, in a lot of different stuff. His Revolution holding company has stakes in everything from Revolution Health, a wellness/fitness/medical advice Web site, to Cacique, a Costa Rican resort, to Clearspring, a Web widget company. Late last year, Case sold Revolution Money to American Express (AXP) for $300 million. And Zipcar, another portfolio company, has just filed for a $75 million IPO.


“We meet again,” sighs Kara. “I just can’t quit you.” “We’re off to a good start,” says Steve.

1:58 pm: Kara–Let’s go back 25 years. Talk about the beginning of AOL.

1:59 pm: Case–Well, Zuckerberg was one year old.

I got into this when I was in college, reading Alvin Toffler’s “The Third Wave.” It was riveting.

We started in 1985, in partnership with Commodore. It was a total bet on community. We believed the killer app was community. Chat rooms, bulletin boards, etc.

On the road show, no one believed us. Which was fair, because we didn’t have many customers seven, eight years into it. Needed lots of technology to catch up a bit. And needed people to catch up, too.

2:01 pm: Kara–What put you over the top? All of those discs?

2:02 pm: Case–It wasn’t the discs. It was the content. By 1992, ’93, many more people had computers in their homes, connectivity was better. The Internet was evolving–it wasn’t legal for us to connect to the Internet until 1991.

It took a while before we were considered an Internet company. Even when we went public, we were an interactive company, or online services. Had to morph as market evolved.

2:04 pm: And at some point News Corp. (NWS) sued you?

2:04 pm: Yeah, in 1998. they were upset about an online game they thought we were excluding. There was a lot of antitrust chatter then. Those were the good old days.

Kara: Well, you proved them wrong, the idea that you were too powerful.

Case: “I’m not going to comment on that.”

2:05 pm: On the Time Warner deal: Made sense for us and our shareholders at the time. It made strategic sense. But as Thomas Edison said, vision without execution is hallucination.

I’m recalling, by the way, that one of our strategies was to buy Apple (AAPL), hire Steve Jobs and put him in charge. It was an idea that was floated.

Big point is that with the right leadership, which my group, including me, couldn’t provide, we were set up to succeed. Look at stuff like iTunes, YouTube, etc.–all of that could have come from that company.

2:07 pm: I stepped down after the merger. After a couple of years, I started making one-off investments. Then created Revolution as a holding company. Runs through portfolio, which you can see on his site.

2:09 pm: Kara–You were early on a lot of important trends. Oh, and tell me about your favorite device that isn’t the iPad (thanks, Kara!).

2:10 pm: I’m interested in the social media side, and there’s some stuff bubbling there that reminds me of the early days. Also, mobile and location-based stuff, really. But really, how the Internet can be a platform to change the world. Even companies like Zipcar and our resorts properties only work because of the Internet.

Kara: What’s the relevance of the Internet to a company that helps rich people travel?

Case: Booking tickets on the Web [hmm]. Health care is the one that can really benefit from the Web. Runs through Revolution Health portfolio.

2:13 pm: Case–Turns out I’m much more interested in businesses that touch consumers. Like Steve Jobs said, I like that better than enterprise.

And health care is really a wellness push. Because health care as we define it is really sick care.

Steve Case.

2:14 pm: Kara–Talk about Twitter and Sarah Silverman.

Case starts to answer, but Kara interrupts and steers him somewhere else.

Case: I really didn’t want to do a blog in the last 10 years, because that seemed like work. But Twitter made sense. I signed up early, like three years ago, but like a lot of people, it didn’t make sense to me. About a year and a half ago it made sense. Less about what you’re doing than what you’re interested in.

2:15 pm: I’ve always liked that interaction part. I wish we’d thought of Twitter–we were headed in that direction with buddy lists, etc.

2:16 pm: Kara–Tease out the different big Web businesses: Facebook, Twitter, Foursquare.

Case: Facebook’s obviously a real company with real revenue. Twitter and Foursquare are much earlier, but they could be on the cusp of a real business with real revenue.

Kara: If you were a 19-year-old college student, what would you be looking at?

Case: I’m hoping that the Internet just becomes everyday life. You don’t call it email, it’s just mail. Etc.

2:18 pm: Big opportunity for Web integration in health: Wi-Fi pedometers, Internet-connected scales, etc. In most cases, remote diagnostics would be able to help you solve and correct problems.

And I think letting people know about healthier choices can solve a lot of problems, and the Web can help with that.

Steve Case.

2:19 pm: Kara–Make some predictions. You’re a visionary!

On Yahoo (YHOO): Case pauses. “I don’t know.” This industry changes a lot. I don’t feel like I’m in a good place to make a judgment. Do remember that iconic brands, with large audiences: You should never give up for dead. Remember what happened to Apple.

On AOL: Obviously it’s not what it was 10 years ago, which is disappointing to see. But still a lot of revenue, cash flow, visitors. A lot of assets for somebody to take forward.

On Apple: Nobody would have imagined this 13 years ago, when Steve came back. Remember that it was worth $1 billion and left for dead. By the way, I’ve told Steve this–I’d love to see Apple focus on health care.

2:22 pm: On Facebook, social networking: Really big. Not going away. That kind of communicating is fundamental to human behavior.

On Hollywood: I do think it’s puzzling. We had a hard time getting VC money into the Internet, but Time Warner would spend $1 billion a year betting on movies. They were very comfortable with that, and so many fail.

2:24 pm: Kara–How do you want to be remembered?

Case: “That sounds kind of like a gravestone question.”

Kara: “Okay.”

Case: I want to be remembered, and my team to be remembered, as mostly a force for good, able to get tens of millions of people to take the Internet seriously and integrate it into their everyday lives. We helped get America online.

2:26 pm: A question from analyst Mary Meeker: Please remind us of the market value of AOL when you went public. And please talk about challenges you had when you were growing (“America offline,” etc.)

Case: We raised $10 million or $15 million, had about $30 million in revenue and were valued at $70 million.

As to the challenges–all of them were double-edged swords. For instance, regarding downtime, it took a better part of a decade to get people to take us seriously, and we let them down. Then again, the fact that people cared about our service problems made it clear that they took what we offered them seriously. It took us a year or so to work through that.

2:29 pm: We had a lot of ups and down. Mostly downs. It was a decade of building. One of my worries now, is that there are so many companies that are built to flip. I wish people took a longer view, and I wish VCs did as well.

2:30 pm: Case: I went to school in Hawaii with Obama.

Kara: How was he?

Case: I don’t know. I was a senior and he was a freshman.

A note about our coverage: This liveblog is not an official transcript of the conversation that occurred onstage. Rather, it is a compilation of quotes, paraphrased statements and ad-lib observations written and posted to the Web as quickly as possible. It is not intended as a transcript and should not be interpreted as one.

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