AmEx pays $300 million for Steve Case's Revolution

ex-aol-head-american-express-pays-300-million-for-steve-case-revolutionRemember Steve Case? He's the guy that used to send you diskettes in the mail to get you to sign up for America Online so you could dial-up to the Internet. Then, in January 2000, he sold AOL to Time Warner (TWX) -- ultimate parent of DailyFinance -- in a $166 billion deal. On Dec. 9, Case's mutated creation, AOL, will become an independent company again.

But Case has moved on since 2000. And Wednesday, he scored a smaller financial victory when he sold Revolution Money to American Express (AXP) for $300 million, according to the The New York Times. Revolution Money lets users pay for things online using a Personal Identification Number with cards that lack names or account numbers. Compared to American Express, it's a lower cost, more secure way to pay.

The big question is what American Express will do with this platform now that it has acquired it. One option would be to close down this competitor. But there are many other such services out there. The question is whether American Express can figure out a way to make Revolution Money's platform earn more than the revenue it loses on the other side of the equation as people swap their credit cards for the online payment system.

Ironically, what American Express is grappling with now is the same kind of disruption that AOL had to deal with a few years ago when it shifted its strategy. As much faster broadband access became widely available, AOL, which still offers dial-up access to the Internet, started trying to make money by selling advertising to companies seeking access to the viewers of its content.

I admire Steve Case's entrepreneurial spirit. And he's clever enough to sell his creations to big companies that must then spend years struggling with the disruption he spurs.

Maybe he'll use the $300 million he got from American Express to start up some new disruptor which he can sell to a big company struggling with its future.

Peter Cohan is a management consultant, Babson professor and author of nine books, includingCapital Rising (due in June 2010). Follow him on Twitter. He has no financial interest in the securities mentioned.

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