If they've already built the brand and that's your specialty, then what
are you doing? What are your goals? What's your mission?
Our job is to continue to grow this business, to take advantage of the
tremendous lead that we've got, the big brand we've got, to make it a
business, make it more appealing and useful for the consumer, to make it
rewarding for the employees. I think in any business you usually have
several levels. If you do one without the others, you will fail. You must
figure out a way to serve all of those, find a strategy, a way to skin the
cat that works for all of those constituencies, not just for one.
But if you really wanted to, you could retire, right? Why not sit back
and take it easy?
You know what it is? I started working when I was 15. I love going into
businesses that I don't know much about but sound interesting for some
reason. And there's always the financial challenge on one end; there's the
creative challenge on another; there's the manpower challenge in
between...all focused on a customer and trying to figure out how we serve
that customer in a unique way. I find it to be remarkably stimulating for
my brain and it makes me feel alive...I get a good, warm feeling out of it.
What I don't enjoy doing, as you probably can tell from my career, is that
once something really gets successful and we actually have real power, I
don't want to be there anymore because I'm not interested in being
powerful. I'm interested in being creative and being challenged. The
hardest times are the most fun times. So you also bond with people; you
make friends for life in those sort of experiences when you're in the
trenches with someone.
Having an opportunity to come and be in that experience at AOL was
irresistible. So I deferred living in Telluride for a few more years.
You've spoken about the concept of reaching critical mass and what that
means for a company. Is AOL at that point?
[AOL is] way beyond critical mass. Nobody else is quite there.
Probably AOL had critical mass around 4 or 5 million subscribers. We got
large enough, we penetrated enough of the country, and we began to get
enough scale and enough of a lead over other people. It begins to be
self-perpetuating and we're beginning to get that kind of momentum behind
You've also said the online service industry is like cable television,
an industry you come from. You said consumers behave largely the same way
across industries. But how can that be true? On cable you have a closed
network. Only a certain number of players can make it in. In the Internet
space, you can have an infinite number of players. Aren't the rules
Consumer behavior is the underlying thing, and what we're all trying to do
is solve it. Some people have--some haven't--realized that in this world
you can have a cable network and [an online] network, but if you
can't get carriage by someone or get aggregated with someone else, you're
not going to get many users.
What we're finding in the Internet is the same thing. There are all these
people saying, "Wow, I've got a Web site!" And then reality sets in and
they find that no one is using it. Well, the reason no one is using it is
because they're not part of any aggregated package. They're standing out in
the free and expecting people to get to them.
I know lots of the content providers who are old friends, and they're
saying, "Hey, we'd like you to give us some sort of profile on AOL so we
can get more traffic." I say, "Fine, we can do that." But there are going
to be a limited number of spaces.
In the cable business, there are a limited number of networks that have 60
million subscribers, but there are about a gazillion networks out there.
Most of them have less than a million subscribers and they won't make it.
The reality is that most of the Web sites out there today aren't going to
make it, either. That's the hard, cold reality.
Speaking of reality, how are you going to keep AOL competitive,
especially in light of all the problems you've been having with busy
signals and the fact that you failed to anticipate how overwhelmed the
network would become? Do you think it's going to affect AOL's long-term
Well, it did not affect us in a long-term way because we're past the worst
of it now, and it's getting better every day. Everybody who was bitter,
mean, and nasty is calling back and saying, "It's a lot better...Thanks."
We're not where we want to be yet. We're continuing to build capacity at a
faster rate than normal to get ahead of it.
I know you joined the company just as it went to flat-rate pricing, but
do you think AOL could have done things differently?
I came in as that was happening. and I went back and asked our people,
"Let's do an analysis of why that happened and where did we go wrong." As I
looked, I said, "You know what? They did a pretty good job of forecasting."
The problem is it's very difficult to forecast the unknown. The good
forecasts in life are where you're saying "Well, somebody else did
that--what happened to them? Let's try to apply it here." But there is
nothing else like this.
It is unbelievable to think that our members doubled their usage on the
service. This wasn't caused by new members signing up; this problem was
caused by our existing members doubling their usage. And that's a pretty
astronomical number to think about.
I actually think it teaches us a lot about our relationship with the
customer. I was talking to some of the folks at Coca-Cola who had a very
similar experience with New Coke. When they switched to New Coke, the user
didn't split and go to Pepsi. The member got mad and said, "Give me back my
old Coca-Cola!" And with us, our members didn't split. They got mad at us
and said, "Fix it!"
They held our feet to the fire, but you know what? That's like a family. If
I did something wrong with my dad when I was a kid, he didn't throw me out
of the house.
Likewise, we have members who held our feet to the fire on this and we
deserved it. They deserved to have AOL the way they're accustomed to it,
and I don't think there's anything wrong with them being mad or holding our
feet to the fire. It's absolutely the right reaction.
Given that you couldn't predict how the unlimited access plan would
affect your service, how can you ever plan for the future in a business
like the Internet, where things change hourly?
We can forecast a lot about consumers by just understanding how they
behave. They're going to behave in this business the same way they behave
They're not going to suddenly be interested in convenience and brands
everywhere except here. Of course they're going to be interested in it
Convenience is what's making this business. So that part becomes very
forecastable. When you start getting into issues like how much of this
capacity will you need, you can forecast that.
What you can't do is [forecast] how much more will my members use
the service if I go to unlimited pricing. Other people did unlimited
pricing and their usage didn't double. What that also tells us
is--surprise, surprise--AOL is in a category by itself. Our members do all
things a lot more, so we have to plan it a little differently, but it's
difficult to forecast those sorts of elements.
Now, this isn't an unsolvable problem. It is a temporary problem because
you know exactly what you have to do: You have to add more modems than
expected to serve the people. So we do it.
NEXT: Content deposed