Ted Leonsis: ‘It’s the Greatest Time to Be an Entrepreneur’

Ted Leonsis: ‘It’s the Greatest Time to Be an Entrepreneur’

Published: November 28, 2007 in Knowledge@Wharton


Meet the new consumers of the new media age. They want things to be better, faster, cheaper and, even more important, free.

"This new consumer is very, very different from [the ones] we dealt
with before," said Ted Leonsis, vice chairman emeritus of AOL, who is
considered an Internet pioneer and whose business portfolio over the
years includes an impressive array of online companies. It doesn’t
matter what business you’re in — restaurant, real estate or financial
services, he added. "We’re living in a world where consumers have taken
control of everything."

Leonsis, a keynote speaker at the recent Wharton Entrepreneurship Conference 2007,
traced his own life story to explain how consumers and the marketplace
have changed because of the Internet. "The expectations of our
consumers are off the charts," he said. "They want everything great.
They want it really, really fast. And it’s got to be free. Trying to
build businesses around that model becomes a challenge."

Using an illustration of a highway map with signs and dates posted
along the main route, Leonsis walked the audience through his own stops
on the path of entrepreneurship — from his first startup company in
1981, to the beginning of his relationship with AOL in 1993, to his
acquisition of the Washington Capitals hockey team in 1999, to one of
his latest ventures, Revolution Money, a Web 2.0 payment platform and
credit-card service.

Leonsis’ foray into entrepreneurship began while he was a student at
Georgetown University. It was 1976, the Bicentennial summer, and he
started a business selling red-white-and-blue snow cones. It was hardly
the stuff of which millionaires are made, but Leonsis said the
experience gave him a taste of what it’s like to start and grow a
business. "I think that entrepreneurial spirit is really what drives
this country and what drives the world economy," he said.

Leonsis, who was born in Brooklyn in 1957, recognized early on the
potential of computers and the Internet. He made his first bundle of
money when, at the age of 24, he quit his job at Wang Laboratories,
raised $1 million and started a company called LIST (for Leonsis Index
to Software Technology). The venture soon led to an acquisition by
another company and a $60 million buyout. "I declared victory," Leonsis
said, although now, with hindsight, he realizes it was "a hollow
victory because it was about starting a business, growing it and
flipping it and making some money…. When I was young, I honestly
thought that was the ultimate scorecard, the accumulation of wealth."

It took a near-death experience in 1983 to adjust the focus of his
radar. "I got on the wrong plane," he said, referring to the fateful
day when he boarded a plane that lost its flaps and landing gear and
was forced to make an emergency landing. "On the way down I prayed
really hard and said if I survive, I promise … to give back." He set
about making a list of "101 Things to Do," a mix of personal and
professional goals, some simple, some lofty. They included "fall in
love and get married," "pay off college debts," "create the world’s
largest media company," and "change someone’s life via a charity." Each
year, he checked off the goals that he had accomplished.

Inspired by this list, he founded Redgate Communications in 1987,
which he said was the first new media marketing company. Leonsis joined
America Online after the company acquired Redgate six years later. As
AOL president, he oversaw its evolution from a dial-up Internet service
provider to a web services business, launching or acquiring
now-familiar names such as Travelocity, WebMD, MapQuest, Netscape and
iVillage.

More Purchasing Power, Less Leisure Time

Today’s online-savvy consumers "want control of their applications,
their content … They want everything when and where they want it,"
Leonsis told his audience. Still, he added, today’s consumers are often
a study in contradictions. For example, they have a lot of purchasing
power, but little leisure time. They have dual incomes, but fewer
savings. They are real estate rich, with less cash. Family life is more
fractured, and people are overscheduled and on the move. On the plus
side, people are healthier and living longer. People are more
sophisticated, but at the same time they are looking for help. They
want to be self satisfied, but they aren’t necessarily happy. They are
watching less TV and living life online more and more. Their media
choices are seemingly endless — satellite TV, instant messaging,
downloadable movies and music, and mobile phones, to name a few.

Leonsis said the three-screen world we live in — PC, TV and mobile
— is only going to get bigger and filled with more choices. He offered
statistics to illustrate the rapidly shifting media business, noting
that only 25% of 30-year-olds now read newspapers daily. "Print as an
industry is over and there is no going back," he stated, showing
downward circulation figures for the New York Times, USA Today, the Washington Post, and the Wall Street Journal. "Print media offer less and less and charge more and more."

In contrast, consumers now see the Internet as a routine and
indispensable part of their work and home life, spending 23% of their
time hooked up to the web, compared to seven minutes a day when he
began with AOL, he said. Latinos and African Americans are the
fastest-growing groups online. And the U.S. is only part of the story.
He noted that North America now accounts for just 16% of worldwide
Internet users, down from 35% in 2000. "China has more Internet
connections than the U.S., and most of them are on their phones…. If
you’re building products and services just for the U.S. market, you’re
giving up 80% of the market," he told the audience. Even though the
global potential for online services is huge, he doesn’t see enough
business plans that have "an international vision of globalization."

Part of the appeal of the Internet, according to Leonsis, is that it
brings people together and can create communities. Witness the
popularity of social networking sites such as Facebook and MySpace and
the proliferation of blogs, which reflect the desire to express one’s
self and also to connect with others. "User-generated content really is
not a flash-in-the-pan phenomenon," he said. Blogs are "empowering a
generation to believe that what they have to say, what they see with
their own eyes, how they interpret that, is very, very important."
Leonsis maintains a blog called "Ted’s Take."

For him at least, business is all about being in the "happiness
business." He said online businesses can cultivate people’s desire to
volunteer and give back. "It’s all about getting out of the I, I and I,
and really seeing where you want to fit into the bigger world." The
Internet has led to a whole new type of charitable giving — online
philanthropy, where "micro-donations" by many donors can add up to a
sizeable contribution.

Being successful with an online business is all about being smart
with math and algorithms, Leonsis noted. "Marketing isn’t just to
people anymore. You have to market to algorithms." Also, "the basic
unit of life in this world is the pixel and every pixel matters on a
page." The ability to cross promote is a powerful benefit of the
Internet, he added, citing Amazon.com’s algorithm-driven marketing
effort that alerts customers who bought certain book titles to other
titles they might also like.

Leonsis, who stepped aside this year from day-to-day operations at
AOL, said that "while it’s never been easier to launch a new
world-class business," entrepreneurs need to know that the pace is
dizzying. It used to be that investors wanted 40% annual rates of
return, but now, "if you can’t grow 25% month over month, we don’t
think you know what you’re doing." If a startup doesn’t take off fast,
"you fall behind very, very quickly."

While Leonsis made his name and a fortune with online businesses, he
has embraced sports and film production with equal enthusiasm, earning
praise this year for Nanking, a documentary about the
atrocities — and heroism — that unfolded when the Japanese invaded
Nanking, China, in 1937. He is majority owner of the Capitals and the
WNBA’s Washington Mystics, and part owner of the NBA’s Washington
Wizards. "I believe sports teams are great assets in the world we live
in," he said. Just like the Internet, teams can build communities.

Leonsis ended his talk on entrepreneurship on a wistful note: "I
wish I was 25 again," he said. "I think it’s the greatest time to be an
entrepreneur."

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