STEALING TIME

Although he described himself as having previously worked with Pepsico as a ‘marketing manager’ his job with the company had involved tasting new pizza flavors at small pizza outlets across the country. In a display of good old-fashioned nepotism, Dan Case recommended to von Meister that he hire his younger brother to take care of marketing for the company. Von Meister, sensibly enough, acquiesced. However, this earned Case the nickname “Lower Case” – “Upper Case” being big brother Dan.

The service really took off only after April 1993, when Jan Brandt, who had joined the firm as the marketing executive, began marketing the service by making free AOL disks available everywhere. By the end of 1992, the service had 300,000 subscribers. Within a year, this increased to 500,000, and by 1997, it had ten million subscribers. By the end of 1998, the market capitalization of the company touched $63 billion, and the stock became a part of the S&P 500 index. AOL had become a major technology stock. While the company’s growth was spectacular, there were also fears that it could become an acquisition target for Microsoft. AOL’s Business Affairs division, headed by David Colburn, aggressively pursued deals and ran roughshod over customers in its rush to boost revenues and attain the size and strength required to fend off the ‘evil empire’.

At the height of the dotcom mania, an association with AOL was believed to increase the legitimacy of many of the decidedly ‘iffy’ ideas that were being turned into business plans by countless aspiring tech-millionaires. Many of the customers who came to negotiate terms for advertising on AOL were young, inexperience people barely out of college, with ideas funded by venture capitalists who had temporarily discarded conventional business wisdom for the virtual wonders of cyberspace. AOL forced these start-ups into advertising deals that were incredibly lucrative to itself – at least at the start. As the boom turned to bust, many of the advertisers who had entered into these deals were bankrupted by the enormous marketing costs, leaving AOL with a hole in its advertising revenues.

Meanwhile, over at Time Warner, it was a different world altogether. Things were not looking rosy for the company. The whole world was talking about a digital future; but no one at the company seemed to have a clue as to how to get there. Companies like Time Warner were being perceived by the stock market as dowdy old has-beens, with little future in the Internet world where business, apparently, was conducted at the speed of thought. Time Warner’s one foray into this brave new world, the Pathfinder project, which sought to bring all its divisions to the web under a common, neutral name, had failed miserably due to infighting and turf battles among the company’s divisions. In such a dismal situation, the obvious solution seemed to be a merger with a company clued into the tech future. What better choice than AOL, the torchbearer for the connected world?

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This case study is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. This case was compiled from published sources.