TECH: Health2.0–this time it’s different?

Dmitriy is worried that Health 2.0 is turning into a bubble. His piece Health Social Networking & Web 2.0 Bubble is a response to his rather prominent featuring in Laura Landros’ WSJ column. He’s concerned that it’s yet another bubble with no business model behind it. I’ll say more about this later, but there are two reasons to be less pessimistic than Dmitriy.

First, the business model is better because a) the tools are significantly cheaper to build and b) one player (You know who) has figured out how to build an advertising supported business online that really works—and is insanely profitable.

Second, even if there are no great riches to be had by independent Web2.0 and Health2.0 companies, the tools, techniques and technologies of Health2.0 will be adopted by the health care system and the consumers of health care. And that will be the most important feature of the entire “movement”.

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  1. I find myself agreeing with the points made by *both* Matthew and Dmitriy – and, no, I am not sitting on the fence.
    The fact is, it is early days yet for so-called Health 2.0 ventures and the jury is possibly still out. Some may survive, even make it good, but not because they stuck to their original business plans but because they were flexible and adapted to new opportunities. Many – if not most – may fail because either the concepts surrounding “Health 2.0” are ahead of their times or because they rub against some behavioral aspects that dog issues relating to health.
    WebMD makes decent revenues from advertising but they also have their corporate accounts. In fact, the corporate accounts point to behavioral patterns that may reveal much about Health 2.0 ventures. These corporate accounts provide employees at companies where WebMD is a vendor with the ability to enter and manage their family health information. In my several conversations with such employees, there appears to be no great involvement in this. A comparison is apt: family finances. Typically, an average person engages with his or her bank account, credit cards, stocks, bonds, etc with a degree of attention and discipline and is willing to pay for services at brokerages or content sites.
    Health, unfortunately, is a passive activity for most; to put it simply, it is “low involvement”. That is to say, one’s focus on health issues dramatically increase when there is a problem at hand either with self or family. At other times, it is at the back of one’s mind, but not something one actively engages in, gathers information on, or is quite willing to pay for. Pay for a physician visit, yes; subscribe to a premium for-pay Dean Ornish or MayoClinic.com for the healthy adult? Thank you very much.

  2. This is a great discussion. I am a bubble-survivor (I used to say that I survived the “first” bubble but didn’t want to be a harbinger of another “pop”).
    It’s hard to argue that there is a whole lot bad about the experiments in digital healthcare happening. From vertical search, to communities, to all-in services like Revolution – there is some really interesting stuff happening at the intersection of social media and digital health. Sure, some will fail. Sure some of those failures will share attributes of non-health Web 2.0 companies.
    But I am seeing some earnest attempts at creating user value. And the great news is that it isn’t being dominated by one industry (e.g. pharma) nor one company.
    Nor is it insanely speculative. Lot more boostrappers this time around. Start-ups have no choice but to create buzz to help meet their business goal whether that is more short-term funding or to acquire users or whatever.
    This time around, there is a more critical eye looking at them (like Dimitriy’s). The VC’s are experienced. Should we be skeptical of those with no practical business model? I suppose so, but that goes without saying. They still might be doing something cool that leads to something more practical.
    I, for one, would like to give them all a little latitude. Let’s see what develops this year. 2007 will be a great year for digital healthcare

  3. Unity, let me address your points in no particular order:
    #1) The purpose of my post was neither to point fingers at any particular company nor claim that Trusted.MD has all the answers. I am sorry if it hit the nerve.
    #2) Let me address your comment re: Trusted.MD. I made that announcement only reluctantly, knowing that I have to tell attendees (and the rest of the world) something about the plans for the next year. The announcement sticks to the facts (like the deal with Transmarx) and it is up to everyone to decide what to make of them. No financial projections.
    #3) You ask what I mean by hype. There is a Wikipedia definition to provide the full background (http://en.wikipedia.org/wiki/Hype), but what I meant specifically is the investment bubble sort of hype. When highly speculative business projections are skewing the decision-making fundamentals of today. You can look up my reference to dot-coms, read about Tulipmania (http://en.wikipedia.org/wiki/Tulipmania) and then read the second WSJ article I linked to. Ruinous effect of bubbles on value creation is well established.
    #4) I am not interested in arguing over who is creating hype and who is not. I just think a little dose of reality ought to be out there. Despite all the tech innovation, there is no such thing as “proven Health 2.0 business” right now. I want to see whatever applications people lump under “Health 2.0” umbrella have a chance to mature based on their intrinsic merits and revenue they generate. Instead of getting hyped by investor money and then tarred as “Bubble 2.0” pops.
    #5) You say private equity investors know what they are doing. Well, the good ones do not actually believe it themselves. They know how uncertain early stage companies and markets are. Many have regretted their investment decisions only few short months after making them. Even the top names in the business have their WebVans, Pets.com, eToys, you get the idea.
    I am glad we are having this discussion. Google will get all these arguments indexed and investors doing due diligence on “Health 2.0” will be able to put things in perspective. This is social media (which I believe in 100%) in action and I hope it will help us avoid a full-scale bubble.
    Thanks to Everyone & Happy New Year !!!

  4. Let me clarify/suggest a few comments regarding Dmitriy’s last comment:
    1) I never mentioned “unsuspecting” investors. That’s your word. I have rarely, if ever, met an unsuspecting VC, private equity, or angel investor. They are cunning and opportunistic. And that is why I suggest they will be investing in online health care companies. Because there is huge opportunity in online health care. There has been little innovation in the past 10 years, and the demand is way past due. That’s what we are seeing anyway as we build our business.
    2) Since you continue to use the word “hype”, I am most curious what your definition is? Didn’t you just put out a press release about launching Trusted.MD before even having a live site, being able to say when it will launch, or being able to explain what your business model is at your own blogging summit? Or perhaps you were trying to ride a wave? Emperor/clothes anyone:-)
    Still not sure what you are suggesting I am wrong about, although it hasn’t been the first time. Bottom line is my suggestion is that 2007 is a year of great opportunity, innovation, and new solutions….whether you call it Web 2.0, 3.0 Health 2.0, or not.
    In the past few months I have met dozens of amazing healthcare startups and smart entrepreneurs tacking major health care problems from the ground up. They don’t have rose colored glasses on. They have mission colored glasses on. They are inspired. They are experienced. They are smart. They are business people. They have built big businesses before. And they are taking on big challenges in bold ways. Have you seen what MedBillManager has done in the past few months? Sermo.com? DailyStrenth? And yes OrganizedWisdom.com? Is this Web 2.0 hype? Nope, its good old fashioned “entrepreneurialism” and it is companies like these that will ultimately help us all get better health solutions. No matter what you call it, there is a wave of innovation hitting healthcare and that is a great thing for all of us.

  5. All:
    I am glad this is generating interest.
    I hear you. But my point was that if we let the next wave of eHealth be defined by proxy by questionable (bubbly) concepts, like Web 2.0 this will confuse development of real healthcare applications. What I am suggesting is think harder to find what the next wave of eHealth should be, rather than parrot buzzwords.
    Thanks for eloquence in expanding on what has been my intended argument, especially eToys and Pets.com example. “Online pet stores” have been THE butt of jokes for all that is wrong with ecommerce for so long. Yet the basic idea of buying things online is obviously sound. We all do it!
    Sorry, you are wrong. There is no other purpose for using “Health 2.0” label rather than catch the reflection of “Web 2.0” hype – to raise money from unsuspecting investors – as you admit. Sure, there is “huge growth potential” but there are no proven models for “Health 2.0” right now. Watch out!
    So here are my humble recommendations for everyone:
    #1) Banish Jargon
    Drop “2.0”-itis and instead explain what the applications are, who they make a difference for and define *relevant* terms as needed.
    #2) Be Skeptical (=Realistic)
    Take off the rose-colored glasses, while examining the claims of “2.0” purveyors. Look to separate the real trends from self-serving hype.
    #3) Get to Work!
    Prove something. How the concepts lumped into “Web2.0/Health2.0” pile make a difference to real people and are generating real money.
    Rest assured, these questions will be asked in 2007 over and over.

  6. Great post Matthew.
    In our opinion Web 2.0 and Health 2.0 are completely different trends. It’s sort of like comparing apples to oranges.
    I don’t agree with Dmitriy that Web 2.0 will have a chilling effect on health 2.0 at all. In fact, just the opposite effect will occur. All of the VC’s, private equity investors, and angels (who have billions of dollars and must invest it somewhere) who are done investing in copycat video sites, calendar tools, and companies with no proven business model, will be looking to invest in untapped sectors with huge growth potential (i.e. online health). (Side note in response to Dmitriy’s first point: WebMD has proved many times over that it is possible to create a successful business so I would say they have done a good job of capitalizing on online health).
    Additionally, while Web 2.0 companies enjoy few barriers to entry, that is simply not the case for Health 2.0 companies. It takes more than a web site and a programmer to make it in Health 2.0. There are different rules, regulations, privacy concerns, etc. We know from first hand experience.
    Health 2.0 also has the luxury of seeing what has and hasn’t worked for those who have come before us. Smart entrepreneurs will learn from these lessons.
    Finally, it’s hard to argue with the data. Consumers participation continues to increase (see Pew, Jupiter, eMarketer, etc.) and the demand for new online health solutions is at an all time high. And as I posted on the OrganizedWisdom.com blog today (http://wisdom.blogs.com), 2006 was the biggest year ever for online health. And next year is projected to be even better…
    A bubble indicates that something is about to burst. Health 2.0 has barely started develop and there are years of growth, challenges, and innovation before us all.
    The WSJ piece (which OrganizedWisdom.com was also included in) is a significant development to end the year. This type of trend piece provides game changing momentum to help those dedicated entrepreneurs, innovators, thinkers, creators, etc. that are working hard to find better solutions for us all.
    There is simply too much work for us all to do at this stage to worry about the challenges/problems/reasons why Health 2.0 won’t work. It’s time for us all to work together to find better solutions and push innovation from the bottom up…

  7. Vince,
    Just as eToys and Pets.com ruined it for would-be e-tailers in other sectors, failed “social networking” sites and sites that base their business on “user-generated content” and go bust are going to ruin it for companies trying to apply similar concepts to the healthcare space.
    “2.0” and all the jargon it’s ushered in are going to become codewords for “money-losers,” and that will have a chilling effect on the application of this sort of technology to our market. The leaders at the time of the slow-down/crash will remain leaders because their competition will have died-off or have already been bought-out.
    Sometimes this isn’t a bad thing – oligopolies and even some monopolies can be good things, and the Health 2.0 companies that survive will qualify as these and their offerings will become de facto standards. But for all the good that can come from the “standards” set in this manner, there’s a lot of bad, too; Microsoft is the poster-child for this.
    I’d argue that the Microsoft monoculture is overall a good thing for PC-centric computing. With a single, dominant OS, programs like Adobe Photoshop don’t require a seperate Mac to run anymore like used to be the case in the early 1990s – that saves you and I and the businesses who use that software valuable time and money.
    (I think we’re all computer-saavy enough that I don’t need to list the faults that people have with Microsoft and its products, so I’ll spare us that.)
    In my mind, the eventual “bust” of Web 2.0 is a given. Under ideal circumstances, it will be more an issue of consolidation than “last man standing.” Either way, what I’m really curious to see is what we’re left with when the dust settles. If Ryan and Dmitry are right (and I think they are), the danger is that in the healthcare space, the answer will be “not much.”

  8. Ryan and Dmitriy,
    …so if I follow your argument, I should be worried about the possible burst of a possible bubble in Web 2.0, and that this could impinge the development of deserving but not yet existing Health 2.0 companies and applications?
    Guys, I’m on your team as to being a believer and advocate for technology in health care, but we gotta build a stronger case here….

  9. Ryan,
    You are 100% on target. The point of my post was to warn people to be watchful of a bubble. Rather than hype “Health 2.0” it is best to (quietly) get to work on proving the real applications.
    The bubble environment was once summarized by Warren Buffet thusly: “when the tide is high you do not know who is swimming naked”. When bubbles pop, legitimate companies in overheated sectors get stigmatized too.
    I do not want this to happen.

  10. Vince: I believe the argument is that there’s a Web 2.0 bubble and that the handful of companies running with the “Health 2.0” moniker will pop with the larger bubble. From the linked article:

    If you compare the first and the second boom and bust cycle, in the second one healthcare is lagging. Every business that has ever been tagged by “Health 2.0” label is still in the diapers in terms of proving the model. Yet the bigger space “Web 2.0” is about to implode. Look for intangible indicators and note the Top 10 words of the year.
    What this means for healthcare? Web 2.0 bubble pop will discredit anyone called Health 2.0. And since the “health social media” is so new this could have a real chilling effect on the legitimate applications and businesses. Pure hypesters are doomed anyways.

  11. Just who are all these Health 2.0 companies? does anybody have a list?
    I’m personally aware of just a handful of companies that would call themselves Health 2.0. Laura Landro’s article in the WSJ only references non-profit or government health related social networking organizations (Daily Strength.org, American Cancer Society, CDC).
    So how can the Health 2.0 bubble break if it isn’t a bubble in the first place?

  12. I think you nailed it.
    The bubble is there but tiny compared to 2000, IMO. More products are coming to market faster with much less capital and better technology. Many will fail but they’ll fail fast and cause less damage.
    What’s interesting to me is that I think you can see two clear segments here: 1.) the relatively few old-school, big capital, cathedral building startups like Revolution Health that are trying to be, well, revolutionary, and 2.) the many new-school, grow with revenue, bootstrapped outfits that are trying to be *evolutionary*.
    The second group didn’t exist during the first bubble but I believe they’ll stick around after this one pops. The big cap startups have to make it before the 2.0 craze crashes and burns or their capital dries up. The smaller, bootstrapped firms on the other hand are much more equipped to deal with a pop because they’re growth is tied to real clients that are paying for real value today. Negative buzz isn’t going to dry up revenues like it will dry up capital.
    What everyone should be on the lookout for is a big cap company with the mentality and culture of a bootstrapped outfit: that’s how you make Googles.

  13. Matthew, I appreciate you highlighting this, but suggest we look a little deeper into the points I was making:
    #1) There is HUGE difference between new “user experience and empowerment” and attempts of people to build businesses that capitalizie on it. The first is here to stay. The second is faaaaaar from proven.
    #2) Sure the tools are cheaper – especially for end users. But if you want to be an “operator” and create an “epicenter” that attracts user attention, tools are your last worry. People have deficit of attention and gravitate to handful of sites. In every category it is winner-take-all.
    #3) Google example (that you cite) is misleading. They amassed huge traffic during the doldrums when no one was watching. So they are king of the hill (however sustainable). Now we have the herd of Web 2.0 lemmings stampeding off the cliff. A handful will win big. Most will fail. Like dotcoms.
    Finally, you are absolutely right about the “movement” and how the tools and techniques will transform the healthcare system beyond recognition.
    All I am suggesting is a more realistic look at the wildest claims we are starting to hear. “Web 2.0” scene will provide clues for things to come.