Steve Case’s New Soapbox for Defending AOL: Quora

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Steve Case, the founder of America Online and the architect of the most disastrous technology merger of all time — the $165-billion combination of AOL and Time Warner in January 2000 — has made it clear at various points over the years that he thinks the merger was a great idea, and that the media giant screwed things up, leading to the loss of hundreds of billions of dollars in market value. Now, the AOL founder seems to have found a new platform for his defense of AOL and the Time Warner deal: Quora, the question-and-answer service that has been adding new users at a tremendous pace of late.

Maybe it was all the free time the AOL founder had over the Christmas vacation, but Case has responded to almost a dozen questions on Quora over the past 10 days. Some are relatively innocuous, such as the one about the Stanford women’s soccer team and their chances for the playoffs, or the question that asked for Case’s top five pieces of advice for aspiring entrepreneurs (in which he linked to a speech he recently gave). But the ones that are most interesting are about AOL and its strategies during the boom, and the failed merger with Time Warner. One question asks why, after AOL-Time Warner lost over $100 billion in market value, “the mantra about building a large number of users is still accepted without question as an acceptable business strategy.”

In his response, Case notes that before the merger, AOL was “the most valuable Internet company and one of the most valuable companies in the world,” and that this market value allowed it to merge with Time Warner “in a deal that gave AOL shareholders 55 percent ownership of a company that had nearly $40 billion in revenue and almost $10 billion in EBITDA” or free cash flow. So why did the merged company later collapse and obliterate so many billions? Case leaves no doubt about where he thinks the blame lies:

The management of the combined AOL Time Warner was unable to capitalize on the opportunities that existed to innovate and build more value. As Marlon Brando said in On The Waterfront, it could’ve been a contender! But as Thomas Edison noted a century ago, vision without execution is hallucination. That, sadly, is the AOL/Time Warner merger in a nutshell.

Case doesn’t name names, but the chief executive of AOL Time Warner after the merger was Gerald Levin, who was then replaced in 2002 by Richard Parsons. Case himself was chairman of the combined company, a position he stepped down from in 2003 — the year the merged entity recorded an annual loss of $99 billion, which at the time was the largest corporate loss in U.S. history. CNN founder Ted Turner, who at one point was vice-chairman of the company, said later that he personally lost as much as $8 billion as a result of the merger, and during an interview with fellow billionaire Richard Branson at the recent World Climate Summit compared the experience to “going down with the Titanic.”

Case wrote an op-ed piece for the Washington Post in 2005 arguing that the two companies should be separated, something that finally happened in late 2009 when Time Warner spun AOL off as a separate company.

And what does Case think about the new AOL? He answered that too, in a question about what his initial vision of the company was and what he thinks of it now, saying:

I feel great about what our team accomplished — indeed we achieved all those goals, as well as others. Obviously the past decade has been more challenging — and the merger with Time Warner very disappointing — but I am cautiously optimistic that the “new” AOL is on a much better trajectory. Go AOL!

Other questions the AOL founder has answered on Quora include one about why the company made it so hard to cancel an account with the online service — in which Case admitted that “as AOL got bigger it became more of a hassle to cancel, and that probably was a mistake,” and added that “a few years ago I remember hearing audio of a conversation somebody had with AOL when they were trying to cancel, and was mortified by the runaround they got,” which appears to be a reference to this legendary incident.

If nothing else, Case’s responsiveness to questions on Quora — even if the answers seem somewhat defensive and/or self-aggrandizing — shows a willingness to discuss those kinds of issues in a public forum, something very few senior tech-industry players do on any kind of regular basis. And it’s also a sign that Quora’s strategy of building the kind of positive community that can attract such people is paying off, although it remains to be seen how much longer it can maintain that kind of control as its growth starts to accelerate.

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Post and thumbnail photo courtesy of Flickr user TEDxMidAtlantic

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