Online Strategy - America Online Inc.

America Online founder Steven Case is considered by many industry experts one of the most successful online strategists. Case's early online efforts began in 1985 when he and partner Jim Kimsey established Quantum Computer Services, Inc. to offer Q-Link, a modem-based online service, to Commodore personal computer (PC) users. Case decided to extend the service to owners of PCs made by Tandy Corp. and other companies in 1987. The following year, Case offered online services to owners of IBM-compatible PCs; owners of Macintosh machines were targeted for the first time in 1989. One of the first in the industry to recognize the potential mass market for interactive online services and content, Case created America Online (AOL), a nationwide online network that included games, e-mail, and real-time chat capabilities.

In the early 1990s, Case devised a strategy designed to turn AOL into an online powerhouse. His plans called for consolidating operations to focus on IBM-compatible and Macintosh computer markets and growing the firm's subscriber base through aggressive marketing efforts such as giving AOL software to PC owners for free. The firm also began to grow its content by forging alliances with media firms. For example, to strengthen its position in the Midwestern U.S., AOL partnered with Tribune Co., publisher of the Chicago Tribune , to develop an online local news and information service for residents of the greater Chicago area. In 1993, AOL reached similar content deals with Knight-Ridder and CNN.

Case incorporated the development of an AOL version for the emerging Windows platform into his online strategy in 1994. When analysts began to predict the World Wide Web would render online services like AOL obsolete, Case began work on an Internet gateway, dubbed AOL.com, that would allow users to link directly to the Internet from AOL.

To broaden the firm's reach, Case expanded into international markets for the first time in 1995 by offering online services in Germany. With subscribers totaling three million, AOL moved into Canada, France, and the United Kingdom the following year. In perhaps one of his most important moves, Case played an integral role in negotiations with Microsoft, which culminated in AOL's decision to include Microsoft's Internet Explorer browser in its software, and Microsoft's decision to include AOL software on its landmark Windows 95 platform. In keeping with his growth strategy, Case reached similar cross marketing deals with AT&T, Apple, Sun Microsystems, Hewlett-Packard, and Netscape Communications. He also recruited Robert Pittman as president, chief operating officer, and head of AOL's e-commerce strategy. To develop the e-commerce potential of AOL, Pittman began working to convince online retailing giants like Amazon.com to sell their wares on AOL. Sales reached $1 billion for the first time in 1997, and subscribers exceeded ten million. AOL expanded its reach into Asia by offering services in Japan that year.

Case believed the reason for AOL's success was its simplicity. To reach as many users as possible, Case devoted considerable efforts to making AOL technology as easy to use as possible. He stated, in the October 1996 issue of Forbes , "If you want to reach a mainstream audience, you have to make it more plug and play. One-stop shopping. One disk to install. One price to pay. One customer service number to call."

The major flaw in Case's strategy that year was his underestimation of the technology AOL would need to handle its massive growth spurts. For example, when AOL launched a $19.95 per month flat fee program, with no limits on usage, it was unable to support the resulting surge in traffic. Users trying to log on to the service encountered busy signals more often than not, and the problems became so widespread that representatives from 36 state attorneys general offices eventually met to discuss the problem. Case responded by funneling $350 million into increasing AOL's system capacity and hiring 600 new customer service representatives. To counter the negative publicity and retain clients threatening to leave, the firm also issued refunds to those frequently unable to access their accounts.

Hoping the bulk of his troubles were behind him, Case retained his strategy of offering a user friendly and increasingly comprehensive online service to a growing number of subscribers. Continuing to grow AOL's services, as well as its subscriber base, Case oversaw two major acquisitions in 1998: instant messaging firm ICQ and rival CompuServe Inc. In 1999, AOL purchased browser software maker Netscape Communications. According to BusinessWeek Online writer Catherine Yang, Case's tenacity served him well. "More than any other leader in e-business, the 41-year-old chairman of America Online Inc. is responsible for bringing the Internet revolution to the masses."

After recognizing that an increasing number of Web surfers were using things like cell phones and broadband technology, rather than PCs, to access the Internet, AOL began offering online access to wireless consumers via AOL Mobile Messenger in 2000. In 2001, Case's growth strategy culminated in the completion one of the largest mergers in media industry history—the $183 billion union of AOL and Time Warner Inc. to form AOL Time Warner Inc.