Is the online medical niche worthwhile?

For the last few years venture capital has been pouring into the online medical field, as companies look to emulate the success of WebMD. Maybe they should have stayed in bed.

WebMD logoFor the last few years venture capital has been pouring into the online medical field, as companies look to emulate the success of WebMD.

Maybe they should have stayed in bed.

WebMD is suddenly looking less than formidable. Last week Motley Fool dubbed it one of the worst stocks in the world.

Healtheon, which owns 86% of WebMD and had been promising to buy it out, has gotten cold feet. Its CEO has taken medical leave, the company sold out a related business unit called Emdeon, and the company cut its earnings estimates.

WebMD blames the pending Yahoo takeover by Microsoft (they're in bed with Yahoo), problems at the drug companies which advertise there, and the general economy for the slumping outlook.

But that's not all. Revolution Health, backed by AOL founder Steve Case, says it has passed WebMD in page views. Rivals like Healthline are beefing up their content, and suddenly there's talk of another dot-bomb, led by health.  

Consumer health sites have always been ad-driven, and are thus vulnerable to the economic cycle. The promise of transaction-driven revenue has never materialized. Neither has the promise of linking doctors and patients more directly. Neither have any of the industry's other claimed synergies.

Without new revenue streams the question now is who will survive the shake-out? Martin Wygod, a veteran deal-maker who took on WebMD after the dot-bomb, is coming back as acting CEO of Healtheon. I would never underestimate Mr. Wygod.

But he's the genius who just sold Emdeon, which had a business model, and it must be asked whether he's just here to do a deal.

The question becomes, is there really big money to be made in consumer health sites, or is this whole industry just a big 404 error?

Newsletters

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
See All
See All