HealthContentAdvisors

Surviving the Shakeout in Consumer Health Sites

• Posted August 26th 2008
• by Janice

Earlier this year, Steve Case used the phrase “not for the faint of heart” to describe the environment for producers of online consumer health sites.  By now, most readers of this blog have heard that Revolution Health is on the block.  Also, we learned last week that Xoova, a shining star among health 2.0 companies just a year ago, has quietly shut down.   

These events point to a more widespread shakeout in online consumer health sites.  We’re not predicting a collapse in online consumer healthcare resources; the long-term outlook is still very positive.  However, some companies in the most crowded, undifferentiated and geographically dispersed segments (e.g., sites for rating practitioners, general health and wellness sites, and social media sites where patients share experiences) will fail and some will consolidate. It’s a fairly predictable outcome as this hot new market matures. 

The reality is that having a plan to fill a perceived gap in the information needs for consumers is not enough to guarantee success, even in a growth market[1].  Consumer health sites face competition from every sector of the medical and health & wellness publishing industry.  Each group is pursuing opportunities to adapt their information or create new services for consumer audiences. Add in the new players, many of which rely solely on Web technology and have little or no publishing experience, and the result is an overly hyped and overcrowded market. 

Furthermore, while many of the new players rely on advertising dollars from pharmaceutical companies, pharma advertising hasn’t migrated to the Web as quickly as most analysts had predicted.  It’s a safe bet that pharma companies, as well as medical device companies and related health services businesses, will eventually transfer more of their marketing dollars to online media, but it isn’t clear that those dollars will be spent on online ads as they exist today.     

We regard the current shakeout as a correction, not a collapse. Too many companies are chasing the same customers and advertisers.  The survivors will have done their homework and will bring technology and editorial experience to bear to solve an information overload or scarcity problem that someone is willing to pay for-either directly via paid content or indirectly via advertising or sponsorship.  We put our bets on companies that not only deliver reputable information services, but also have business plans that include multiple sources of revenue to help them ride out the ebbs and flows that are inevitable in the long-term growth cycle for online consumer healthcare resources.

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[1] There is even some debate about whether demand for online consumer health information has plateaued.  See Matthew Holt’s blog entry for links to two recent surveys that reveal somewhat contradictory results.