Steve Case: AOL/Time Warner Merger May Have Worked Had I Played A More Active Role

This morning at TechCrunch Disrupt, AOL cofounder Steve Case sat down for an interview with our own Michael Arrington to discuss an array of topics, including his current venture Revolution, his motivation to stay involved in entrepreneurship, and even a story about AOL’s offer to buy Yahoo for $2 million back in 1995 (they turned it down, but Case said Jerry Yang and David Filo probably would have agreed to $3 million).

One of the more interesting topics to come up during the conversation was whether or not Case thought the Time Warner merger was a good idea. Case hasn’t been directly involved with AOL for years — he left his role as CEO when AOL merged with Time Warner in 2000, and left the board of directors in 2005 — but he didn’t shy away from speaking about the company. Case said it was obviously clear in hindsight that the deal has been a disappointment. But he said that it’s hard to say whether he would have done anything differently with the merger, as AOL was at its peak at the time (Case and AOL shareholders did quite well). He also said that he thought the merger might have gone better had he been more involved with the transition.

“It’s hard to say given the dynamics of the time particularly as Mike mentioned, the market cap of the company — it was really the peak of the Internet boom, and it felt like a good time to trade what we had for what we would get. So I can’t really say I regret that. I’d like to think but it’s probably arrogant and presumptuous that if I had played a more active role on driving integration maybe it would have been better. But part of the deal was that I stepped aside as CEO and was Chairman without any operating responsibility.”

Here are my notes from the talk:
Arrington: What keeps you going?
Case: I love building stuff. For 25 years I was focused on AOL. Now instead of playing a direct operating role working with entrepreneurs, I’m funding around a dozen companies, and they’re all interesting to me.

Arrington: You’re not doing it for the money, so it’s almost a hobby for you?
Case: Yes. Our mission is to invest in people/ideas that can change the world, sometimes through philanthropy, sometimes entrepreneurship.

Arrington: Last night we were talking about early days of AOL. You were talking about the number of users AOL had..

Case: We started in 85, went public in 1992, when we had 184k users. 7-8 years later it was like 25 million customers. And the nice thing was that each of those customers were paying 25 dollars a months. We like to say, those were the good old days.

Arrington: Let’s talk about Revolution. What exactly is it?
Case: The genesis really was… I stepped down as CEO as AOL almost a decade ago and said, “so what do I do next?”. Revolution is a holding company. It has three parts. One part is Revolution Capital (30-40 million bets each). As for the fat vs lean startups, I think both are right. Our sweet spot tends to be fatter companies. Companies with higher barrier to entry. We also have Revolution Ventures which are smaller ventures. LivingSocial, ClearSpring, TweetUp.

Case: Zipcar has 7000 cars. About 200 cities. It’s crazy to own a car in cities. Relying exclusively on taxis doesn’t work either. Instead of going to Hertz you can just walk a block away.

Arrington: Of all the companies you’re invested in, which do you think about most?

Case: LivingSocial is really on a tear. There were companies doing this 10 years ago, and it was mostly right but they didn’t have the right context. I think social media is changing that.

Case: About three years ago a company wanted to do Facebook apps… LivingSocial. They tried figuring out how to monetize that, and about a year ago they pivoted. Went from being a thin to a fat ‘speedup’. 30 employees to 130 in the last six months. I think ‘grouponing’ will be an important segment. Probably a few big companies built.

Arrington: Is the idea at all relevent to Amazon?

Case: I don’t think it’s irrelevant. I think they probably look at it as more an opportunity than a threat. These companies are really picking a deal or a market. Interesting business or interesting business model. Merchants like that it generates new customers and zero risk.

Arrington: What do you think about Tim Armstrong as CEO for AOL?
Case: So far so good. But I’ve been out of AOL for ten years. Everybody gives AOL up for dead because they have so many challenges over the last decade. But if you put the past aside it still has 100 million users in the US, 250 worldwide users. That’s a pretty good hand to be dealt with. Seems like he’s doing that.

Arrington: Yesterday on stage John Doerr talked about the ‘third wave’. What do you think, does that ring true?

Case: I think what we’ve shifted to is that having spent a lot of timing building core infrastructure and platforms, now you can shift to different things. Embedding these things in other areas. ZipCar for example, it’s enabled by the internet and couldn’t make it without the internet. These companies don’t have to be on the Internet itself, but how you build on it in other industries. Healthcare will probably be a big thing here.

Q: Since the start of your career what do you consider your greatest failure/mistake?
A: I’ve had a lot. Obviously merger has been a disappointment. It was smart, but was disappointed with how it played out. But AOL was like many other companies. There were a lot of ups and downs to it. perseverance was key. Today… isn’t focused on enough. There’s too much tendency on moving to next big things. Too many companies built to flip vs built to last.

Q: Looking back on merger what would you have done differently?
A: Hard to say. Felt like the peak, so I can’t really say I regret that. I’d like to think but it’s probably a bit presumptuous. That if I played a more active role it maybe would have gone better… but part of the deal was that I would have less of a direct role.

Arrington: If you hadn’t merged where would the company be today?
Case: We recognized broadband would be big, we recognized having ownership of cable would be important. But the key lesson, which Edison said, is that vision without execution is hallucination.