HEALTH 2.0: Healthline personalizes Aetna (and more)

Healthline Networks is pursuing a really interesting strategy as it attempts to "dance with the elephants" in vertical search in health care. Today, it’s announcing a number of new partnerships and perhaps most interestingly a deal with Aetna, where the information in the members’ PHR will personalize their online experience. I sat down with Chairman and CEO West Shell yesterday to talk about what it means for the industry, for health plans and where he sees Healthline going.

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  1. The CPM supported ad model is dead, or about to be dead. Pharma and Med Device are seeing very low if not negative ROIs on these types of campaigns. The only thing they care about is the cost per action they can gain and they would have to buy way too many impressions to make the CPM game work. The CTR on those ads is just way too low.
    As for PHR’s no consumer is interested in putting all that crap onto the internet. That is what we pay doctors for and deal with all their crap. Part of my expectation for my co-pay, two hour wait times, etc. is that they keep up with my health records.
    Most Americans are fat, lazy, and treat their health with little regard. You think these people will suddenly start entering data into a computer? Get real….

  2. Anon, I like your spunk.
    But I don’t understand your obsession with my ‘not getting’ your ‘original point’, inasmuch as I took no issue with it. License away, Healthline, and fare thee well!
    I believe one of the many, many challenges they’ll encounter – as will the would-be PHR vendors – is the diffuse nature of the health care market.
    Just because one dollar of every 8 in our GDP is labeled ‘health care’ does not mean there is something even close to a homogenous market for ‘health care’. What are the ‘correct’ subdivisions? Beats me – but I predict that whomever figures that out, or at least finds a better way to address the implications, wins.

  3. gjudd – I see that you are up to your normal witty posts. I never said that PHRs through advertising was a sure fire business model. It is an alternative though that should be tried since consumers have repeatedly refused to spend even nominal fees out of pocket for them. If anything, it is going to be difficult for even Microsoft or Google to generate significant online advertising revenues through their PHR applications directly. Going to take alot of traffic to do that and I doubt even in next 2-3 years that takes place (if ever).
    We will go back to the original point though – Heathline is not trying to sell any form of online advertising through a PHR of any form. What is so hard to grasp about that point? Nor do they have a PHR product of any type. Try listening to a few calls that WebMD does or go read their annual reports.
    Healthline is creating a direct ad sales force with a network of partners that will compete with WebMD, Revolution Health, and other large healthcare traffic websites for direct advertising dollars from pharma/biotech firms, medical device firms, and consumers pocket goods. Now there are a bunch of caveats will be successful enough to generate an IPO or sell to large company in 2 years but it has nothing to do with PHRs directly.

  4. Anon, sure wish I could be sure I’m following your ‘reasoning’ – your drunken grammar & spelling, along with your scrambled math, make it a challenge. Your enthusiasm is evident, though – so keep trying!
    And you’ve missed my central point – there is not nor is there likely ever to be enough traffic thru PHRs to energize the kinds of advertisers you mention – not unless they price that focused, motivated attention much, much higher than your $3.50 CPM. (I would argue that’s what Rxcos et al should do).
    Unless that change happens, ad-supported PHR is a non-starter – it’ll enrich 2 or 3 lean service providers perhaps, but an industry? Very doubtful.

  5. Doubter – Agreed on that. Healthline needs to continue to build traffic through their site and parternships to prove to advertisers that they can compete with some of the other big alternatives out there in the healthcare online space and other alternative sites. Also need to build out the licensing side too.

  6. Doubter – Even though Healthline raised $35M in venture capital even of their investors probably contributed a max of $5M a piece. Probably less.
    Let’s say Healthline’s revenue reaches $20M this year (doubled from 5 to 10 to 20). Now if they stay on course to have a successful IPO in two years/sell in two years, the 5-10x multiple for their venture capital investors will be repaid and probably then some depending upon a few factors.

  7. What was Healthline’s revenue last year?
    To what did it double?
    When can the “big media firms” expect their 5-10X pay back for investing?

  8. gjudd – One last thing. You are right about adoption and utilization rates of PHRs by health plan members. They are pretty horrendous (1-5% in almost all cases unless your talking a staff model HMO like GroupHealth or KP that is utilizing the MyChart app as their PHR application). Health plans have realized this and are trying several methods to increase utilization. Ultimately though they realize they need access to providers though and too provider data.
    Employers’ PHR adoption is a mixed bag. See a much wider variation here depending upon what type of incentives the employer is using to drive adoption/utilization, how effective their education outreach is to their employees, and a couple of other factors.
    In general, I don’t see privacy as the “boogie-man” of PHRs. I know surveys show differently but I don’t buy it. A privacy breach is much more likely to occur when a foolish employee leaves unstored data on a laptop/portable hard drive that is stolen or a malacious employee purposely steals consumers’ data from their employer. Maybe a health plan or employer would utilize this data for malacious intentions but they are really risking opening a can of worms on a couple of fronts including legal ramifications if caught. Not to mention the huge PR backlash they would take. That stink would take a while to wash off.
    My bet is that people in large part just don’t have a compelling reason to use PHRs (most people don’t monitor any aspect of their health for recreation), it is a real pain to access and put data in it, and the products are limited/poor for the most part. If PHRs are easy to access, people have a reason to use it and it has good data, then adoption rates will climb. But the kicker is consumers don’t want to pay directly out of pocket for it.

  9. The mystery is how Google is going to generate revenue from their PHR play right now. They supposedly aren’t going to charge customers (no DTC) or anyone for the matter, they aren’t going to make money from charging any fees to third-party applications, and they aren’t going to advertise on it supposedly.
    While Google gives away many things for free (because they can’t figure out a way to succesfully monetize them for the most part), Google is not a NPF. They ultimately are doing this for the good of society. They have to be looking at a way to monetize this in the near future. Do the go the health bank model eventually and try to charge consumers or others? Do they start others in the healthcare ecosystem (e.g., health insurers) to look and access this data? This is the 64k question right now with Google. That their supposed commitment to the Google Health project in general over the long haul (say 3-5 years out).

  10. gjudd – You completely missed the point. Healthline’s deal with Aetna is a LICENSING sitaution. Revenues are not dependent upon any advertising dollars in any aspect. That is why is a diversification of revenue streams away from advertising dollars.
    Heathline is also not a PHR company either. ActiveHealth Management is the company (now owned by Aenta) that is powering Aetna’s PHR record to their members.
    Healthline is going to make advertising revenues throw their direct ad sales force selling advertising to pharma/biotech, medical device, and consumer product goods companies among others. Now it depends on how they price their online advertising, the methods they use (CPC, CPM, CPA), and the various revenue sharing agreements they will have in place with channel partners but once again this is in no-way related to advertising dollars from views to a PHR.
    For example, say Healthline sells advertising to J&J on a CPM basis. Now there are a bunch of caveats to this but I will use a simple example. Save it cost J&J $3.50 CPM (per 1,000 impressions) and Healthline’s revenue is $2.00 RPM (per 1,000 pages) viewed. To get Healthline’s revenues you take the RPM * total number of impressions/1000 = Healthline’s revenues. It is not quite this simple but hopefully that helps out. If not go to wiki and read up on CPM pricing (cost per impression).
    This isn’t small potatoes either. JPMorgan has graphical advertising revenues at $8.5B this year and Goldman Sachs has a pretty similiar figure too for just the US.
    Now Microsoft is trying to generate search advertising revenues from the search function (Medstory) imbedded in Healthvault. That is an example of a PHR that is being supported by ad-fees (although it is not generating nearly the revenue currently given’s Microsoft initial investment). Much more of a long-term play but it is dependent upon users going to the HealthVault application, using the search function, and clicking on a link (CPC basis) or add box (CPA basis).

  11. Doubter – see Dr. Shreeve’s long-tail digression further down the page.
    Any network can cost a bunch to build, but at some point (probably well before $35m worth), the marginal cost of adding each additional participant rapidly becomes vanishingly small. The value, if it is there – I’ll grant you there’s been relatively little road-testing as yet – will come in the extent to which a number of people with heretofore unmanaged or undermanaged conditions benefit from effective & very-low-unit-cost monitoring/multidirectional information exchange. Their good health is good for everybody, because providing them recurrent rescue care sucks big resources from the system.
    (and tho the real investment number probably IS large in absolute terms, I personally wouldn’t put lots of stock in the ‘declared’ investment amount).
    Anon suggests there’s potentially big dough in advertising/sponsorship of phrs, but given the powerlaw shape of healthcare use, there just won’t be enough repeat-visit eyes on the phr(ize?) to get too many advertisers revved up (and Anon, I really hope I’m missing something here – please prove me wrong).
    Manhattan Research’s Mark Bard is interesting on this topic.

  12. “I guess I’m kind of at a loss as to why someone would invest – did he say – $35M (!) in this… ”
    Doubter doesn’t have a clue. Shell said that revenue doubled last year and looking to double again this year. More importantly, Healthline is diversifying into a more solid revenue stream by going after licensing fees from health insurers (one of the few sources spending real money in Health IT) and providers (likely through the form of deals with EMR/PMS vendors or in some cases large delivery systems directly).
    On the advertising side, Healthline has been working hard to build out unique views and page views through their various partnerships with other portal sites like Ask.com, AARP, AOL, etc. Granted they have to split the ad revenue with them but still increasing eyeballs and that is what you want when they are trying to build out their direct ad sales force. This model works and is how WebMD makes an overwhelming majority of their money (75-80% of its yearly revenue according to their 2008 guidance figures). Revolution Health and others are chasing the same game.
    Just to give you an example of what they are chasing:
    -J&J spent $2.2B on advertising in ’06, which but them in the top 10. This was down from $2.6B in ’05. What is important though is that their Internet spending interested to $34M (15.5% of total J&J advertising in ’06). More importantly, THIS INCREASED nearly 38% from $24M in ’05. So while J&J slashed their ad budget in a big way in ’06 they will boosted their Internet spending in a big way. Many other large pharma, medical device, and consumer product goods companies are taking the same track. Even if their is a recession and these companies slash overall ad revenues this year and next it is high likely that Internet ad revenues will continue increase. Talking billions of advertising dollars on Internet healthcare spending in a few years and the newspaper and magazine guys are trying to figure out how to keep their piece (and doing a terrible job of it for the most part although the major media companies have been waking up and staring to get heavily involved in healthcare either through acquisitions, partnerships, or on their own properties like NY Times renowned effort in HC).
    Now for the licensing fees side. Shell said Healthline is licensing on a PMPM basis. Makes sense. That is how almost all Payer IT is priced. They probably are doing a multi-yr deal with Aetna (say 3 years) that has a setup & implementation, support, and licensing fee. You figure even if it is only a few pennies PMPM for Aetna (and they drive hard bargains on their Payer IT negiotations because of their membership size), that is big-time money for Healthline. Take 17M members * $0.02 or $0.03 (on the low side) PMPM * 12 months annually and you have a pretty nice additional revenue stream coming in. Do some consulting/custom work and even max them some more.
    Now if Heathline can land a few more whales on the payer side (your big Blues and National guys) you are talking some real money here. Probably not going to equal the advertising dollars but an important revenue stream nevertheless.
    So Doubt this is why $35M would be invested in startup capital. Just take a look at the investors and it is a Who’s Who of media and healthcare companies.

  13. Would the seventeen people who use Aetna’s PHR please provide feedback as to whether their online experience has been “personalized” as a result of this?
    What is the ROI for Aetna or others for providing this?
    I guess I’m kind of at a loss as to why someone would invest – did he say – $35M (!) in this…