The AOL Exodus Effect

You've Got Growth

The story behind AOL's rise and fall has a straightforward arc: The upstart used its high-flying stock to buy media giant Time Warner in 2001, only to quickly find itself saddled with an accounting scandal and a problematic business model that dragged the company down following the bursting of the dot-com bubble.

Becoming an Internet giant was not easy. In the 1980s and early '90s, the firm didn't have a local pool of technology workers to draw from. AOL had to reach out to financiers in New York and California and lawyers in Boston. For those reasons, Case urged his associates to move AOL to Silicon Valley.

"The concern I had at the time was that . . . Washington, D.C., was not a center in terms of technology or entrepreneurship," Case said. "It was more difficult to get people to leave large, stable companies to join a fledging start-up, because that wasn't the culture."

But then-AOL chief executive James V. Kimsey, an Arlington native, vetoed a move, and the company slowly built its team, luring some of the nation's brightest young technology and media talent. On Fridays, employees would take a break around 6 p.m. for a beer bash -- and then go back to work late into the night.

The trick to AOL's fast growth was its vision for turning the Internet into an accessible place for non-techies. When it did that, and its trademark expression "You've Got Mail" became commonplace, AOL took off. It didn't matter where it was located -- it was the center of attention.

As it grew to 600 employees, AOL uprooted from Tysons Corner to a largely undeveloped area near Dulles Airport and established a 154-acre headquarters in 1996.

"It was the beginnings of development of the whole area," said Warren Amason, a senior vice president at Grubb & Ellis, which brokered the deal. Later, Grubb & Ellis brokered the deal to bring telecom giant WorldCom to Dulles.

"The fact that AOL was there validated the idea," Amason said. "I don't think [WorldCom] would have made the decision to go there if it hadn't been for AOL's presence."

The rising value of AOL stock enriched its employees. By one count, AOL had more than a thousand millionaires on staff at once. Case and other senior executives collected nearly $1.5 billion by selling stock from 1996 to 2001. On one occasion, Case gave leather jackets to the staff to celebrate a milestone in the service's growth.

With their new wealth, AOL and its employees gave millions of dollars to local charities. AOL was once the region's 16th-largest giver, with cash expenditures in one year of $1.3 million and $7.6 million worth of goods.

AOL's booming stock price also enabled the company to make high-profile acquisitions. Yet those purchases didn't always benefit the region.

For example, AOL bought Netscape, the maker of the first Web browser, for $4.2 billion. But Netscape's home, and that of several other technology companies bought by AOL, remained in California.