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Pittman has begun to shape AOL, primarily through a series of deals that will morph the firm from a plain online service into something more akin to a personal butler. He and David Colburn, one of his top dealmakers, persuaded Tel-Save, a long-distance reseller, to use AOL to market and bill for a phone service. This means AOL members will be able to pay their monthly phone bill online and use interactive software to pick the calling plan that works best for them. In exchange for this efficiency, Tel-Save has paid a record $100 million to AOL. Tel-Save CEO Daniel Borislow says he feels lucky: "AOL has 9 million subscribers with the best demographics in the business, and the only other place we could have offered this type of service to consumers is Microsoft, at one-fourth the size." AOL is also banking on the growing business of selling products online. Firms such as 1-800-FLOWERS and bookseller Amazon.com have paid for a crack at AOL's audience. It's one of those warp-speed inversions you hear about in cyberspace: two years ago, AOL execs were shoveling out millions to get content to come to them. Now Case is often the one cashing checks. And all the dealmaking is matched by astute strategy. AOL is looking for fast revenue and long-term partners. Merger watchers say the firm's cherished goal of a buyout by a giant such as AT&T is still a real part of their calculus.
Case has also moved into the business of creating content, with mixed results. Last fall the company formed AOL Studios, a group that has begun producing content for AOL users and the Web. But for the tens of millions of dollars Case has spent on that pursuit, the service has one certifiable winner: the stock-market site called Motley Fool. Among AOL Studios' current projects is Digital City, an electronic newspaper for cities as diverse as Denver and, soon, London. The newspaper hasn't caught fire yet, but neither has Microsoft's competing version, called Sidewalk. AOL's much heralded online conferences are still small potatoes: its last big attraction was a Rosie O'Donnell chat that drew 16,000 readers.
AOL officials like to point out that users spend 80% of their time inside the service and just 20% on the Web. That's somewhat deceptive since much of what AOL offers is also available on the Web. But AOL must be doing something to attract customers. Motley Fool may be the only homegrown hit, but the fragmented online world may not be about huge hits anyhow. AOL thinks just assembling the eyeballs is enough to win. "Five years ago, I predicted that more people in prime time would be on AOL than watching a cable channel," says Ted Leonsis, who heads AOL's content operations. "Now more people come to AOL than are watching Larry King Live."
AOL has begun to capitalize on its audience--members with seductively high disposable incomes--by selling advertisers a chance to reach them. In the next year, analysts expect AOL to sell close to $150 million in ads. Says Henry Blodget, an analyst at Oppenheimer & Co.: "AOL viewership, the number of hours spent looking at the screen, is now approaching that of ESPN, MTV, CNN and a few other cable companies. If you fill that time with advertising, the power of the revenue-generation machine is phenomenal."