VIENNA, Va. -- Every once in a while, Steve Case puts on a "disguise" and goes strolling through an electronic world of his own creation.
Under an on-screen alias, he signs on to America Online, the computerized community he co-founded in 1985, and uses the system as one of his customers might. He scans bulletin boards where people trade the latest recipes and computer tips and drops in on "chat lines" where his far-flung customers argue, banter, console, consult, wheel, deal and sometimes fall in love with people thousands of miles away.
"I want to the extent possible to think what they're thinking and walk in their shoes," said Mr. Case, the 34-year-old president and chief executive of America Online Corp.
As he cruises through the network, Mr. Case passes the electronic equivalents of schools, churches, shops, senior centers, brokerages, libraries, video arcades, dating services, post offices and bars -- gay and straight.
"I'm always intrigued by how people are using these new possibilities," said Mr. Case.
Over the past year, just about anything has seemed possible for America Online. The company's subscriber base has grown at an explosive rate: 300,000 last July, 400,000 in October, 500,000 in December and 600,000 in January. Profits have soared, and the stock price has increased more than threefold in the past year despite some widely publicized technical problems.
From way back in the pack, America Online has emerged as a formidable challenger to the twin titans of the computer on-line service industry, Compuserve (1.6 million subscribers) and Prodigy (1 million). Rick Martin, an analyst with the Chicago Corp., projects that America Online will top 1 million subscribers by September and 2 million in early 1996.
But Mr. Case sees far greater possibilities. "A new medium is emerging," he said. "It's an interactive medium in which the key driver will be participation."
And it will be a mass medium, he says -- not just a niche for technology buffs. Mr. Case envisions a time, not far off, when a computer on-line service is almost as much of a fixture in the American home as the television and the telephone.
Many technology analysts agree. Mr. Martin projects that the on-line industry will grow at a breathtaking pace through the rest of the decade. By 2000, he said, 75 million to 80 million U.S. households will have the capability of receiving on-line services, of whom almost half will sign up for one.
"All the pieces are starting to come together to move this from essentially a niche market to what we think will happen over the next 10 years to turn this into a mainstream market," said Mr. Case.
The youthful America Online president did not create the on-line service industry. Compuserve and Prodigy were both around long before he started the company that would become America Online.
In recent years, however, Mr. Case has emerged as the industry's more visible cheerleader and most aggressive marketer. He has been forging partnerships with content providers at a blistering pace: The New York Times, NBC, Time and Hachette magazines are among the media that have signed up to provide articles and interactive forums on America Online.
The key to America Online's success has been simplicity. Prodigy and Compuserve might have a richer store of information, but even America Online's critics concede that it is the most user-friendly of the major on-line services.
"Steve Case is to this decade what [Microsoft chairman] Bill Gates was to the last," said analyst Kenneth T. Berents of Wheat First Butcher & Singer in Richmond. "The day I met him in 1991, I knew that he was really into something big."
To understand just how big the medium could become, it helps to talk with America Online users.
Hope Dlugzima, a writer in Knoxville, Tenn., said she received America Online software five months ago. "Literally, from that moment I've been addicted," she said.
Now she regularly uses it to send E-mail to a publication she works for in Prague. She's made friends all over the country and found her literary agent on line.
John Cornell, a 32-year-old entrepreneur in Titusville, Fla., runs an invitation-only conference on interactive media twice each month in a private "room" -- which any member can set up for any legal purpose -- on America Online. He said that making business contacts on line carries an important advantage for him because of his youthful features. When people aren't judging him by his appearance, his ideas get a fairer hearing, he said.
The most compelling advertisements for the medium, however, come in the romantic sphere. A search of America Online's Romance bulletin board found about a dozen messages from people who had met their spouses or future spouses on-line -- most after a long electronic courtship.
The man who brought these couples together is an unlikely matchmaker.
At America Online's modest headquarters outside Washington, Mr. Case occupies a spare ground-floor office with none of the trappings of power. The sole decoration on the wall is a cheap print of the campus of Williams College, his alma mater. The small conference table is chipped and worn, as if it had been purchased from a second-hand shop.
The tall, soft-spoken Mr. Case said he still recalls the first time he used an early generation on-line system 12 years ago.
"I remember it being frustrating, but actually magical when you first got into the system and got access to information and were able to talk to people all over the world," said Mr. Case.
The magic made Mr. Case want to get into this embryonic business. The frustration made him want to reinvent the industry.
Inspired by Alvin Toffler's concept of the "global village" linked by telecommunications, Mr. Case joined with James Kimsey, now America Online's chairman, in 1985 to found Quantum Computer Services. It was a small on-line service designed to operate on Commodore computers, then a leader in the consumer market.
From the beginning, the former marketing executive for Procter & Gamble and Pepsico stressed ease of use as an important selling point for his service.
In 1989 the service broke away from its tie with Commodore and developed a program for the computer based on a philosophy matched his own: the point-and-click Apple Macintosh. In 1991, it was renamed America Online and went public in 1992.
Reserved about his personal life, Mr. Case becomes expansive when asked about his corporate vision.
"We want to create ways for people to communicate," Mr. Case said. "We want to make sure there's a rich palette of tools to work with to communicate."
By the end of the decade, he said, those tools will include pictures and sound. In December, America Online announced plans to team up with General Instrument Corp., a leading maker of advanced television equipment, to develop services for interactive TV. Meanwhile, America Online and its rivals are forming other partnerships to test the concept of using cable TV networks, with much superior signal capacity than telephone lines, to deliver their services.
Within a few years, he said, parents should be able to transmit full-motion pictures of their children's birthday parties to Grandma via their on-line service. Video chat lines, where people can see each other instead of just typing messages, are maybe five years out, he said.
But video won't be the "be-all and end-all" of tomorrow's on-line services, he said. "People's ideas can really captivate you, more than video."
Andrew Kantor, PC Magazine's staff editor for networks and communications, agrees that video will become an option as on-line service moves onto higher-capacity cable, but he doubts people will use it much.
"People don't want video. They don't want to comb their hair or fix their makeup," he says. "People like the ability to hide behind this screen where they have the ability to flirt with a girl and say you're 25 when you're 14."
While 1993 was a breakthrough year in terms of America Online's membership, it was a tough year for its technological infrastructure.
The big membership breakthrough for America Online came last spring, when it cut its rates well below both Prodigy and Compuserve. Subscribers now pay a flat $9.95 each month for the first five hours on line and $3.50 an hour thereafter. According to a report by Chicago Corp.'s Mr. Martin, 10 hours a month of standard-speed service costs $27.45 on America Online, compared with $43.75 for Prodigy's Plan 1 and $56.95 for Compuserve.
After the rate cut, America Online grew at a pace that exceeded all of the company's expectations. Each month or two, the company would announce a new milestone passed -- 300,000; 400,000; 500,000; 600,000.
Late in the year, America Online's smooth-running system began to go haywire, abruptly bouncing users off the network or taking agonizing minutes to post a message in a supposedly "real-time" chat. Signing on during peak evening hours became an hourlong ordeal.
The problems have led to a mini-revolt among America Online's subscribers. "America Online is the breakdown lane of the information superhighway," read one message on a complaint-laden AOL bulletin board.
Last month, Mr. Case sent a letter to subscribers apologizing for the delays and promising improvements. Attributing the problems to the service's unexpected "hypergrowth," he said the company would delay the introduction of new features and curtail marketing programs until the system can handle the traffic.
So far, Mr. Case has gotten credit for candor and the stock market has been forgiving, but delivering on that promise by May 1, as the company has promised, could be crucial to its reputation.
"If they don't clean up their act very quickly, they will quickly go the way of Prodigy and become a laughingstock," says PC Magazine's Mr. Kantor. Prodigy took a public relations beating several years ago over its censorship of some electronic mail -- a development that America Online capitalized on effectively.
In an industry full of Steve Case admirers, Mr. Kantor is a skeptic. He faults the America Online chief for making big promises and then failing to come through on schedule.
"First you get an Internet connection and then you advertise it," he said, referring to the Internet link America Online promised in December but hasn't delivered. Mr. Case said it was delayed while the company deals with the capacity issue but will go on line within a few weeks.
In a recent review of on-line services in PC Magazine, Mr. Kantor basically rated America Online as just another pretty interface, without much substance to its content.
"Right now, America Online is not a good on-line service," Mr. Kantor said. "Compuserve is. Prodigy is -- not a great interface, but a great service."
Joshua M. Harris, president of the Jupiter Communications market research firm in New York, thinks America Online is in danger of being "blown away" when some powerful new competitors enter the market later this year. They include Ziff Communications, publisher of PC World and other magazines; Rupert Murdoch's Delphi; the software giant Microsoft Corp., and AT&T.;
But Mr. Case said he's used to competing against well-heeled rivals, having gone head-to-head with Prodigy, which is bankrolled by Sears Roebuck & Co. and IBM Corp.
So Mr. Case keeps beefing up his offerings. Within the past two weeks, America Online has improved its financial services coverage through a partnership with Morningstar Inc. and enhanced its news offerings through an agreement with the Reuter news service.
"I don't want this new medium to turn into a vast wasteland," Mr. Case said. "It has the opportunity to be more."