Swisher - There must be a pony in here somewhere: the aol time warner debacle and the quest for a digital future

THERE MUST
BE A PONY
IN HERE
SOMEWHERE

The AOL TIME WARNER Debacle
and the Quest for a Digital Future

KARA SWISHER

WITH LISA DICKEY

CONTENTS

WHAT IS THE SOUND OF
ONE DOOR SLAMMING?

THE TRUTH, THE WHOLE TRUTH, AND
NOTHING BUT THE TRUTH
(or something like it)

THE PERILS OF PAULINE

NOTHING LEFT TO LOSE
EXCEPT EVERYTHING

THE $10 MILLION NAPKIN

PURSUING THE PUTZ

WAY, WAY AFTER THE GOLD RUSH

THE END OF THE BEGINNING

A PORTFOLIO OF PERSPECTIVE

To Louie and Megan
and
To Shar

THERE MUST BE A PONY
IN HERE SOMEWHERE

AUTHORS NOTE

Of the myriad problems plaguing the AOL Time Warner merger, perhaps one of the bigger problems was the lack of disclosure among the many players about motives, business prospects, and simple emotions. Save for the legendary entrepreneur Ted Turner, who became the voluble weathervane of the deal, very few in this story were as forthright as they needed to be to make the merger a success.

With that in mind, I thought that some of the first words to the reader of this book should be about disclosing things about myself. Thus, I think the reader must be made aware that my partnerMegan Smithhad been a top executive at a dot-com company called PlanetOut, which has had a longtime investment from AOL. AOL made its initial investment long before I met her, althoughas is the typical practice with startupsit continued to invest in follow-on rounds after we met. I obviously had no involvement in these investments, and Megan no longer has an operating role at the company. Finally, she also worked briefly at a nonprofit literacy organization created by an AOL Time Warner board member, but is no longer employed there.

Second, I based most of this book on my own reporting and on interviews I conducted in 2002 and 2003 with a plethora of key sources from both companies, as well as throughout the Internet and media industries. I also used my own reporting from my first book, aol.com, for the early chapters on the history of AOL. But, for background research, I also relied on several books, magazines, and newspaper and online accounts. I have tried to include noting these sources wherever pertinent in the text of the book itself, instead of buried in footnotes, so I could give proper credit where it was due.

But I would be lax if I did not mention a few in particular here. Among books, I would give special credit to the incredible work done in: Ted Turner: It Aint As Easy As It Looks by Porter Bibb; Master of the Game by Connie Bruck; Burn Rate by Michael Wolff; and Bamboozled at the Revolution by John Motavalli. Among newspapers, magazines, and online sources, I would especially point out: Wall Street Journal, New York Times, Washington Post, Business Week, Time, Fortune, Wired, Industry Standard, New York, New Yorker, News.com, and the Dow Jones News Service.

And now to the really important part of any book-writing proj-ectthanking those who have helped me pull this off once again. Here, I must give the most appreciation to Megan Smith, who has endured this endeavor with the equanimity that is her hallmark and the kindness that is at the heart of her nature. From being encouraging while I complained to being wise when I was foolish to being quiet when I ranted, she has been the perfect partner, most especially for her loving care of our son. Thanks too to Louie, whose ever-present smiles and laughter have become like oxygen to me and whose life is a constant reminder of what truly counts.

My mother, Lucretia Carney, who clipped out every story on AOL Time Warner she could find, provided the kind of support and love that never waned. And thanks too to the rest of my wonderful family, as well as my extended one, including my very best friend Joe Brown, Ed Daly, Mark Clark, Silvia Rivera, Cosmo, and, sigh, my dear departed Bo.

Huge kudos and much credit for this book must go to Lisa Dickey, who apparently lost her mind temporarily when she agreed to take on both AOL and me for a second time. She has been an invaluable sounding board, an honest voice, an excellent editor, and the finest of friends.

At the Wall Street Journal, I could not have done this project without the support of Steve Yoder, Dan Hertzberg, Paul Steiger, Gordon Crovitz, and many others. Of everyone at that august newspaper, though, Walt Mossberg has been my mentor and friend in so many important ways. Leslie Walker and Laura Blumenfeld of the Washington Post have also been valued colleagues and friends.

Thanks to all at AOL Time Warner and throughout the online and media sectors who agreed to talk to me for this book. I extend particular appreciation to those who spoke on the record, since doing so was so uncommon in this complex story. For those who wanted to remain nameless, I thank you for the information, but I still wish you had gone on the record. I also would be remiss if I did not thank those at AOL Time Warner whom I bugged for an entire year with annoying fact-checking queries and endless requests for interviews and information, especially John Buckley, Kathy Bushkin, Trish Primrose, and Ed Adler. I promise you all, I will never again write a book on AOL. (Well, unless something even more newsworthy happens in the future.)

And this book would have never occurred without the help of my agent Flip Brophy, my aol.com editor Jon Karp, and Crown publisher Steve Ross.

Finally and especially, I extend the warmest thanks to my editor, Annik LaFarge. There is no such thing as a great reporter without a spectacular editor, so any credit I get for this book goes to her too. Any criticism, of course, is all mine.

KARA SWISHER

Id like to thank Kara Swisher, who gave me my start in books by hiring me to help her with aol.com in early 1997. Thanks also to my many clients since thenyou know who you are, and I appreciate your entrusting your books to me. To Barbara Feinman, Deborah Grosvenor, and Laura Einstein, thank you for your advice and help over the years. To my parents, my brother David, and my Uncle Pittyou cant pick your family, but if you could, Id certainly have picked you all. Finally, to Shar Taylor, thank you for all the help, loyalty, and love youve given me over the past five years. Your support has meant everything to me.

LISA DICKEY

We are all at a wonderful party, and by the rules of the game we know that at some point the Black Horsemen will burst through the great terrace doors to cut down the revelers; those who leave early may be saved, but the music and wines are so seductive that we do not want to leave, but we do ask, What time is it? What time is it? Only none of the clocks have any hands.

ADAM SMITH, The Money Game

Prologue

WHAT IS THE SOUND OF ONE DOOR SLAMMING?

When the door slammed in my face from 3,000 miles away, I knew Steve Case had actually managed to pull off the heist of the very new century.

Luckily for me, it wasnt a heavy wooden door, but a virtual one. Many virtual ones, in fact, being banged shut by different high-level executives at America Online Inc. almost immediately after I pinged them electronically. I had done so because an unusual number of them were logged on to the online service in the wee hours of Monday, January 10, 2000.