@ EconHealth: Deals In Health Content; Valuations Disciplined; Competing With The Portals

econhealthdeals After an afternoon discussing the challenges of establishing a health content startup, the final panel at EconHealth got to deals: who’s buying and who’s investing in what. ContentNext publisher Rafat Ali moderated a discussion among a group of dealmakers, from the perspective of investors, bankers and would-be buyers.

Interest areas: Esther Dyson: “The way I divide the market is into the arms merchants and the establishment… what’s been missing: there’s been professional content and there’s user generated content, which may or may not be valuable or reliable… and then the third thing is the content about the users.” It’s the third thing that’s exciting to Dyson, who is an investor in 23andMe, the know-your-own-genes startup. “I think it’s this area that’s so exciting… Microsoft (NSDQ: MSFT) is really, really well positioned, as is Google.” With all these things, there’s a question on whether users are aware of these new tools. Morris R. Levitt, Managing Director-Life Sciences, Desilva+Phillips, noted that the big buyers of these startups are either PE-backed platforms or major consumer media firms, like MSO. The problem: “When I listen to a lot of these specialty things, I find that a very low percentage of things are of interest to these organizations.” Most of them aren’t up to scale. Women are particularly valuble, since in many households, said Levitt: “women are the chief medical officers.” Lots more in extended

Why medical now: John Lambros, Managing Director, Savvian: “In the past year and a half there’s been a real reawakening of this vertical… because of the macro trends in this area.” “We’re really at the front end of what I think is a big, big evolutionary track. Right now there are a lot of ad dollars at the portal level. The transition over the next 12-18 months, as you go to the broad audience reach to the specialized verticals… that’s where the element of context and community and other features start to become relevant.”

Advertising: Lambros argued that companies need to diversify their revenue streams, at least on the ad level. Dependence on a few big advertisers leads to risks, since anyone could have a terrible quarter at any moment. Dyson noted that new models are emerging: rather than selling behavioral tracking or advertising, there’s now an opportunity to sell medical data (assuming the privacy kinks can be worked out).

Deals: Benjamin Wolin, CEO, Waterfront Media: “The pendulum has swung away from (the big portals) concentrating in a vertical… their focus is on ad services and going across the entire web. That pendulum will swing back.” On valuations, Wolin argued that because it is a complex area, there is a lot of valuation discipline.” Levitt: As a motivated buyer, we’ve seen multiples of 4-5x revenue, which is healthy.” On industry stalwart WebMD (NSDQ: WBMD), nobody on the panel was willing to guess where they were headed long-term, though Lambros noted that its valuation represents a key benchmark for the sector. Everyone wants to see it warrant a strong multiple.

Google (NSDQ: GOOG) & Microsoft: Dyson: “They could be tremendously valuable to everyone in this industry.” She likened the opportunity to the evolution of Quicken. Quicken, at first, had to create its own APIs to sync up to the major banks. Then the smaller banks created their own systems to hook in to Quicken, especially once users started using it: “The same thing is going to happen in health care… Microsoft and Google are trying to build their customer base. Once that customer base exists, you’re going to see people using their standards.” Wolin: “It’s hard to compete with Google.” But if the product can be differentiated enough, such as what’s happened in travel search, then other leaders can emerge (e.g., Kayak). Dyson: “Doing a search without your health record attached to it 10 years from now will be called crazy.” Ideally, it won’t be called health search, it will be called health care.

loading

Comments have been disabled for this post