The news that AOL bought Time/Warner made me pause. I know I wasn’t the only one caught off-guard. After all, Time/Warner is big. And having spent much of my career marketing Time Life and Time/Warner businesses, I know first-hand just how big. In real numbers not millions, but TENS of millions of customers. A major studio, magazines, TV and cable networks. We’re talking real clout!
It never occurred to me that the company that defines big international media conglomerates could be acquired by one that wasn’t even a blip on the radar six years ago. But AOL’s Steve Case thinks big. And BIG is where the action is and always has been.
Think back to seventh grade history and the lessons about Manifest Destiny. We have never been a nation of little thinkers. AOL is a great mass-market product a product of big thinking. Critics can say what they want, but consumers have voted, and they overwhelmingly have picked AOL. Prodigy, CompuServe, Microsoft, and AT&T are all road kill on the Superhighway. They all huffed and puffed and still got run over by the AOL juggernaut.
How Case and AOL have managed to be victorious at every step of the way is instructive. At the core, they have kept it simple a lesson all of us should heed.
For starters, never lose sight of a few simple facts there are 103 million households in the U.S., or about 300 million individuals. GM and Ford sell millions of cars per year. P&G sells tens of millions of boxes of Tide. Shania Twain sold 26 million CDs from just one release.
These companies, and other mass marketers like them, need mass reach. Think magnitude of 10 million not merely one million. In the TV marketing business, we used to have a rule of thumb: If a cable network had a subscriber base less than 10 million they were marginal they didn’t matter. Why? Because on any given day, actual viewers were often less than 1 percent and actual buyers were .01 percent of that number not one percent but one-tenth of one percent. What that means is on a good day you could expect 100 responses. On a bad day zero. And bad days happen that’s reality.
Case knew what his reality needed in 1996 with competition surfacing from MSN and AT&T and that was more customers. And while everyone myself included were waiting to see Case emerge waving a white flag, he “Jonesed” us. Yes, in the spirit of John Paul Jones, the famous naval hero who, when faced with almost certain defeat his ship was sinking responded with “I have not yet begun to fight.”
Case’s response to the threat of formidable competition: Do whatever it takes to get more customers than everyone else. Oh, and one other thing do it fast! AOL’s solution: Carpet bomb computer users with disks. Use package inserts, direct mail, direct response television (as opposed to awareness TV). Remember those ever-present AOL disks? Who could miss them they were everywhere. What AOL did was simple. What they did was big. And, as we all know now, what they did worked.
And once AOL crossed the five million threshold, they were unstoppable. They figuratively, sucked all the oxygen out of the room. MSN, AT&T and Prodigy were left in the corner like a collection of wheezing asthmatics. AOL bested all the rest without au-courant commercials and laser targeted messages. They did it with basic communications on a bigger scale than anybody else they got disks in the hands of consumers and most of the time the disks worked. Simple. They didn’t spend months agonizing over strategy and their “message.” They simply acted.
But when AOL crossed the proverbial 10 million mark, their next regularly scheduled reality check proved something different their reality had changed. The establishment, they learned, is “brand sensitive.” The establishment wants you to look good. Nice table manners and all.
Case knew this and knew he needed someone to bridge the gap. Enter Bob Pittman. Exit carpet bombing and DRTV. Enter Image TV and BIG marketing deals. Exclusive relationships with Big Brands. New products (a la Instant Messenger) and new acquisitions (a la Netscape).
But even the shiny new armor couldn’t shield them from the problems looming on the horizon. Another reality check pointed out that high-speed cable (currently insignificant by the 10 million rule of thumb) would be a force to be reckoned with. High-speed cable could do to AOL what AOL did to its competitors. And when the bubble bursts there’s no more Monopoly money. Now whadda ya gonna do?
And so like John Paul Jones, Case will abandon the ship he came in on the dial-up modem and step aboard the Time-Warner fleet of content, cable connectedness, and cash flow. Once again, staring failure in the face, he thought big and moved on to fight another day.
The lesson: Contrary to what many pundits and academics are saying, the Internet is not about micro-targeting or niche services. It’s about taking mass communication to the next level. It’s about distributing a story to millions tens of millions of people. It’s about creating new forms of mass entertainment. And yes, it’s about selling millions of boxes of soap, millions of books, millions of cars and millions of songs. Integration and evolution with old and new media are inevitable.
My advice to you: Keep your eye on Case and AOL and see where they venture next.