Like many of you, I was surprised to hear the news that Revolution Health would merge with Waterfront Media, the operator of Everyday Health Network. In this email interview, Mark Bard, president of Manhattan Research, shares his thoughts on the deal and its implications.
David Williams: When Steve Case launched the Revolution Health website last year he said, “While Revolution Health will be a journey over many years to come, we are excited today to launch a site that is the cornerstone of our efforts to revolutionize healthcare.” Now it seems like he’s throwing in the towel on the online business and keeping the rest of the company separate. What’s going on?
Mark Bard: This recent move by Revolution Health highlights the challenges in building a health site and achieving critical mass that appeals to both consumers using the site and advertisers investing in the channel. Like a number of industries today, there is the potential for significant value creation at the two ends of the size scale. You can be on top as one of the largest sites with scale or you can become a highly targeted site with a unique and engaged audience.
This move allows Revolution Health to achieve critical mass and deliver a combined network with the Waterfront team. The harsh reality is that building out a health site today takes more than just funding. It requires the ability to meet the needs of two customer segments – the consumer and the advertiser.
David E. Williams is co-founder of MedPharma
Partners LLC, strategy consultant in technology enabled health care services, pharma, biotech, and medical
devices. Formerly with BCG and LEK.
David: Waterfront Media and Everyday Health Network are not exactly household names. How are they differentiated?
Mark: Waterfront operates a network of sites with different messaging and content that varies by the individual site. They take a very different approach than a site such as WebMD, which heavily brands the core site as the company. While EverydayHealth.com is an important site in their network, it is part of a larger network of sites with varied health, diet, and wellness content.
Another example of a network approach is that of Health Central Network. They are betting, similar to Everyday Health, that a collection of sites can deliver traffic and value to sponsors. There are arguments to be made for focusing on one branded destination and arguments to be made for a fragmented network of sites. Can they coexist in the same market? Yes, and you have sponsors today that may actually invest in both approaches and believe each gives them a unique audience and value.
David: It seems like companies have been slow to make money in the Health 2.0 space. What does this say about the market opportunity?
Mark: Although Revolution Health used terms like Health 2.0 in their marketing and positioning, in reality Health 2.0 is a very broad term that is used to describe everything from community to networking to anything beyond static content. In many ways, the “older” companies like WebMD – of course old is relative in this space – are in many ways Health 2.0 companies in that they deliver advanced next generation services in addition to their core reference materials and content.
With regard to the market opportunity or environment for highly targeted Health 2.0 companies, the challenge they face is not so much the business model as much at is about their audience or ability to deliver critical mass. If you have a great tool but no audience using it, that presents a challenge in a market that is still dominated by advertising business models seeking share. However, in the coming years we will see the emergence of innovative companies and models that will serve as infrastructure for other players in the system. For example, sites may provide Health 2.0 apps that can be integrated into existing health portals, health plan portals, or possibly even physician practice websites and generate revenue on a licensing or retainer-based agreement.
David: What does this mean for consumers? What does it mean for advertisers? What does it mean for Revolution Health partners?
Mark: The impact of mergers among health portals to consumers will be positive given the combined companies will have the ability to spread investments over a larger audience, making it possible to invest in apps, content, and tools that may not have been an option within the individual companies. For the advertisers, the benefit is that the combined network will help them address ongoing concerns about the ability to reach a critical mass of consumers or those within a disease segment. However, the potential concern to advertisers is that despite their need for critical mass, they still want to have the ability to use multiple outlets to negotiate the best pricing. The challenge is that you can’t have it both ways. Critical mass and large combined networks gives you scale but also provides those with the largest networks the pricing power.
David: How do you think the online space will evolve? In particular, what can we expect in terms of business models?
Mark: The next two years will serve as a shakeout in the industry. As advertising and marketing budgets come under pressure, those with the best audience and ability to demonstrate ROI and engagement will continue to drive share and pull budgets from those promoting their sole value as unique visitors, page views, or even worse – those pricing inventory as a discount off the market leader’s pricing.
The audience for online health has grown every year since 2000 and there will be continued growth in the near term. Over time, the growth will not be in simply adding new eyeballs, although that will continue as a driver in the near term, but rather the ability to become more than a medical reference and a resource to tap into sporadically over time. The goal will be to evolve the sites into health management resources providing consumers the ability to truly manage their health and wellness online.
In addition to the opportunities for growth in the United States, the international markets remain in a very early formative stage and will present opportunities on a market by market basis as well as for international companies seeking to build out global branding capabilities for advertisers. Although the branding of sites may differ between markets, the ability for a global marketer to tap into a global network and audience will become a reality for a growing number of brands in the coming years.
David: What products and services does Manhattan Research offer for those who are interested in learning more?
Mark: Manhattan Research offers clients in the health and life sciences markets the ability to better understand how their target audience, consumers and physicians, are using technology and digital channels today to inform and drive decision making. It could be fundamental insight into something like how females with cancer research disease information online.
On the other hand, it could be using historical and current data to forecast and project channel mix within physician specialty segments. In other words, how will neurologists be using the Internet as a complement or replacement for their sales reps in 2, 3, 5 years?
These are the questions we answer for clients planning for what the future will look like – as opposed to building out strategies and brand plans based on the historical research or only focusing on what the market looks like today.
At launch, an estimated 95% of their traffic was bought. That number is now down to about 80%. Take away the marketing spend for driving traffic to their site and they would be a site you never even heard of online. If their investors are wondering where all of their money went, look to Google!!!!
To paraphrase the old lady in the classic Wendy’s commerical – “Where’s the beef?”
Perhaps I am one of the few who highly suspected that Revolution Health (a la Steve Case) would fail to meet a presumed Health 2.0 need.
Unlike Case’s AOL wild success, his entry into Health was too late. Although market speculation seemed to grant the endeavour accolades, the users (ie, consumers, and patients) revealed their underlying suspicions regarding Revolution’s goals. Many suspected the credibility of information on the site. After all when did Steve Case get his M.D. The reason for it’s relatively dismal market share may have to do more with the AOL debacle. Market analysts and speculators notwithstanding, the users were not enthusiastic, and failed to ‘tell their friends’ the ultimate measure of success or failure on the internet.
My humble opinion