AOL's Leonsis Steps Down

I noted with interest the news today that Ted Leonsis is stepping away from his operating role at AOL to pursue other projects. Leonsis isn't your typical tech executive. He is a serial entrepreneur who sold his company to AOL, and then remained at AOL as vice chairman for many years, overseeing much of that company's customer interactions. My friend Sara Goo recaps Leonsis's rise in the Washington Post today.

"Leonsis was one of AOL's earliest leaders who, along with Steve Case and Jim Kimsey, built a business that helped Americans log onto the Internet, a utility they envisioned would become as integral to people's lives as the telephone and television," she and coauthor Tom Heath write. Leonsis intends to focus more of his time on a portfolio of investments including the Washington Wizards, Mystics, and Capitals sports teams. He also recently produced his first documentary film, and is interested in funding others.

Leonsis has a pretty long history with Inc. We first wrote about him in 1994, and I believe he particiapted in a peer group program we run called Birthing of Giants. Most memorably, near the height of the dot-com bubble, Leonsis keynoted the 1999 Inc. 500 conference in Nashville. (That particular Inc. 500 was notable for profuse cigar smoking, the vocal styling of country star Jo Dee Messina, and the late Gov. Don Sunquist doing that raising the roof move on the dance floor.)

But back to Leonsis's speech. He said lots of things that, in hindsight, previewed AOL's eventual decline. For example:

"When Microsoft came at AOL," Leonsis told the audience, "people asked me if I was afraid of Bill Gates. I said I was more afraid of Jerry Seinfeld. We could actually see how the number of people on-line would plummet between 9 and 9:30 on Thursday nights. Fortunately, the numbers always picked up about 9:40 or so, when people went back on-line to talk about what Kramer had said, or whatever." Since 1999, Microsoft Explorer has been the dominant browser while the use of Netscape, which AOL acquired for $4.2 billion in 1998, has dropped off sharply.

In his talk, Leonsis also talked about a firm that AOL acquired for more than $400 million depsite the fact that the company hadn't produced a dollar of revenue. "Revenues," the CEO of that firm told Leonsis, "are just a distraction." Oh really?

Finally, Leonsis talked at length about brands. As Bo Burlingham wrote in the Sept. 1999 issue of Inc., Leonsis said that there were two types of brands. This is Burlingham describing Leonsis's philosophy: "[Brands are either] loved (like Disney) or they're needed (like AT&T). In the early days of America Online, [Leonsis] struggled to figure out which category AOL fell into. Then, on a sailing trip with his family in the Mediterranean, he was forced to stop in Positano, Italy, where he mentioned to a shopkeeper that he was with AOL. The man pulled out a newspaper with the headline 'AOL del Morte.' AOL had been down for 19 hours, and Leonsis hadn't known because he was on the boat. When he got back, his wife said, 'I told you you'd be sorry if you went ashore.' But he found out that the AOL brand was needed, not loved." As we now know, with the emergence of relatively cheap high-speed Internet connections, AOL, which was never really loved, was suddenly not really needed either. And that ultimately sent the company into a tailspin.

Let me be clear: I respect Leonsis a lot. He is a smart guy and a dynamic entrepreneur. But it's interesting to look back on his triumphal comments today, knowing that AOL's place at the head of the business world's pecking order was so short lived.

Mike Hofman was previously editor of Inc.com and a deputy editor at Inc. magazine, which he joined in 1996. The site was nominated for a National Magazine Award for Digital Media in 2010, and was named the best business website by Folio Magazine. In 2006, Hofman was part of a team of writers nominated for a Webby Award for best business blog. He lives in New York City. @mikehofman