How Steve Case and His Company Are Driving the Sharing Economy


The folks that brought you America Online have quietly launched Zipcar, LivingSocial and the Web 3.0. But is the sharing economy a peculiarity of the recession or the beginning of a brave new market?


Pictured: Steve Case, the CEO of Revolution, a venture firm with investments in shared resort properties, Zipcar, and LivingSocial.

Three days after Steve Case, the founder of America Online, stepped down as chairman of AOL Time Warner in 2003, he took a longtime colleague out for pizza. Case wanted to get back to building companies. He wanted to open a new venture capital firm to attack old industries with the same dynamic, unwieldy Internet that AOL had harnessed before it was trampled in the mid-2000s.

One year later, his firm, Revolution, had acquired a vacation-home sharing company that now owns $1 billion in mansions around the world. Three years later, it helped to create what you know as Zipcar, now the world's largest car-sharing company. The same year, it invested in a new company started by four former employees called LivingSocial, an online social commerce company with more than 45 million global members.

Where great ideas really come from. A special report

A luxury-home network. A car-sharing company. An explosive deal site. Maybe you see three random ideas. Case and his team saw three bets that paid off thanks to a new Web economy that promotes power in numbers and access over ownership. The so-called sharing economy has taken off in the Great Recession, as companies like Netflix and Zipcar have allowed the exchange of DVDs, cars, clothes, couches, and even kitchen utensils. The promise of a post-ownership society is that we can do more, own less, and rent the rest with Web-enabled companies. That's a huge break for cash-strapped families in a weak recovery. Whether it's good news for companies who rely on customers to buy new things, rather than share old purchases, is much more complicated.


"I feel like everything we've done came out of that one lunch"

On January 10, 2000, Steve Case signed a deal that married AOL, then the largest Internet company in the world, to Time Warner, the world's largest media and entertainment company. At $165 billion, it was the most expensive merger in American history, designed to produce the world's next great media conglomerate.

The marriage didn't last the decade.

AOL was a juggernaut of disruptive innovation with a stock worth twice as much as Time Warner at the time of the merger. But the Internet bubble of the late-1990s, and the online ad surge that rode its mighty expansion, was already beginning to pop. AOL's top source of income was paid subscriptions for dial-up and e-mail. In the years after the merger, the Internet faced what Case himself called a "nuclear winter" of Web advertising. Simultaneously, new online start-ups were disrupting the Disruptor by turning the Web and email into free commodities. In short, AOL was being usurped by the very forces of Internet innovation that it helped to revolutionize.

And so, on January 12, 2003, nearly three years to the day after the merger was sealed, Case resigned as the chairman of AOL Time Warner. Late that spring, he left the company. It was a Friday. On Monday, he and his longtime colleague Donn Davis had lunch at a California Pizza Kitchen a block south of Dupont Circle in Washington, D.C.

"I feel like everything we've done came out of that one lunch," said Davis, a five-year veteran of AOL and now a general partner at Revolution (and once baseball's youngest contract lawyer for the Chicago Cubs). "I remember eating a barbeque chicken pizza and talking about how at AOL we had been attackers. We wondered what if we attacked big traditional industries where there has been very little change and very little innovation."

At a meeting in Steve Case's current office at Revolution, in a converted townhouse on Rhode Island Avenue a few blocks from their foundational pizza lunch, Case recounted his transition between AOL and Revolution with brisk matter-of-factness.

"I spent almost 20 years building up AOL," he said. "The first decade was the pioneering decade. The second decade was prime time. I really enjoyed the first phase better. I wanted to take the things I learned in the first phase and apply them to other consumer businesses."

Like any venture firm, Revolution would spread its bets across a variety of projects. Before it would find the companies that helped revolutionize the car and discount industries, its first unequivocal success was a small vacation-sharing company called Exclusive Resorts.


It was a Tuesday, four days after his boss stepped down as chairman of AOL Time Warner, when Donn Davis arrived at the Case Family offices around 10:30 am. Case was already there, already excited about a new idea.

"You know I've been thinking," Case told him, "what about doing something with vacation homes? It's a huge industry. It's an expensive hassle to maintain the houses. There's gotta be something there."

With luxury homes, Revolution refined the playbook that would help it transform cars and buying

He was right. Vacation homes are indeed an expensive hassle, as you'll agree if you're among the tiny group of Americans who owns one. The average cost of owning a summer home is more than $100,000 a year in mortgage, upkeep, and insurance, according to Revolution's research. The average use is only 17 days a year. That comes out to almost $6,000 per vacation day -- equal to four rooms at the Four Seasons Hotel George V in Paris -- and that's after you've bought the home.

Two weeks after leaving AOL Time Warner, Case discovered Exclusive Resorts, a club that shared a handful of luxury condos and houses among a select group of members. He liked what he saw. And, because he was interested in luxury homes anyway, because he saw an opportunity to try out a new theory of business, and well, because he's Steve Case, he decided to buy the company.

By the end of the year, Revolution would own 80 percent of Exclusive Resorts. In three years, membership grew by 100-fold. The real estate portfolio grew to more than $1 billion.

The simple idea behind Exclusive Resorts was "fractional ownership," which is a more syllabic way of saying "sharing." Wealthy families pay a membership fee for access to one of hundreds of large homes in choice locations, from Peninsula Papagayo in Costa Rica to the Eden Club in St. Andrews, Scotland.

This was 2003 - a geological epoch in the past, by Web standards. There was no such thing as YouTube. Facebook was a few months old. The sharing economy was so young, it didn't even have a name.

Still, Case and Davis knew they were onto something. If thousands of families would pay for access to homes, maybe they'd pay for access to other things. What was similar to a vacation home -- expensive to buy and a hassle to own -- but with much broader appeal? It would have to be something that people spend thousands of dollars to buy but could just as well use without owning.

What about cars?


"An important aspect of entrepreneurship is paying attention and noticing things," Case explained to me in his corner office at Revolution. And one day in 2005, two years after leaving AOL Time Warner, he did notice something on the street. It was called a Flexcar.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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