Why is Steve Case’s online health venture already looking to sell itself, just a year and a half after it launched? Yet another tale of hubris in the e-health sector.


Back in 1999, I left the mental health site I founded — the largest site of its kind at the time — to join drkoop.com to help them build a mental health center. Within 6 months I left, frustrated by the lack of interest in actually publishing independent, world-class health information and the focus on pushing as many ads as possible in front of visitors.

Shortly thereafter, the company imploded as the expectations they sold to advertisers and investors never materialized. One of the cornerstones of their offering, by the way, was a personal electronic health record. Guess how popular that was? (Hint: How many people do you know use the drkoop.com PHR? None, because it no longer exists.)

Drkoop.com was launched with a former Surgeon General of the U.S. From a medical reputation perspective, it doesn’t get any better than that. And it failed — miserably. The only people who made out well in that company are the executives who golden parachuted to financial safety, many of which were actually rewarded for the company’s losses.

Fast forward to 2008. Revolution Health launched to much fanfare in 2007, and in a pre-launch blog entry still on the website, Steve Case wrote:

We aim to build RevolutionHealth.com into the world’s leading health site – and we hope that our focus on an engaging design, high levels of personalization, and an unparalleled sense of community will enable us to achieve that goal. But we’re far more than a web site. We’re a company that’s trying to fundamentally change the health care system. Revolution Health is about making sense of the complicated world of health care. And it’s about putting you-the patient-at the center of that world. […]

We know health care is complex, and striving to revolutionize the health care system is full of risks. But the team at Revolution Health is up for the challenge. We aren’t expecting overnight success, and we know this will be a hard slog. But we are committed to seeing this through.

So what happened? Why, only a year and half into this grand challenge to change the U.S. healthcare system are they looking for a buyer? Why is every other large online e-health company talking to them about a possible merger? And what happened to their commitment to seeing this through?

I can’t say what happened for certain, since I don’t have any unique insight into the company. But from what I can piece together, it looks like the company suffered from classic startup problems — overbuilding far too quickly for traffic and sales that never materialized. They partnered or bought companies that had little to do with their core mission. They did this just to build their “network” of sites, but had no strategy to monetize them. Why buy other health websites with substantive traffic only to shut them down and not even bother redirecting the traffic lost?

Social networking sites, as another example, have great traffic and page view numbers, but advertisers run screaming from their user-generated content. So the traffic is virtually worthless. All of this looks good on paper, in spreadsheets and on ComScore, but provides little return on value. And does little to put “you — the patient — at the center of that world.”

So Revolution has been cutting corners ever since it launched, according to folks in the trade. Layoffs seem to have occurred with alarming regularity, with the last round closing down their employer business. It’s not clear to me how one can start a revolution in personal health care if one is busy shutting down one’s business divisions and laying off employees every quarter (attributed to their acquisitions, which at least isn’t entirely untrue).

And now this — their putting themselves on the sales block. I guess it was inevitable, since a merged entity of some sort would seem to be better positioned to compete with the WebMD behemoth. But wasn’t this also obvious 2 years ago? I mean, what kind of genius or fool does it take to say, “Sure, we can take on this established, 10-year-old entity in just a year or two’s time on our own!” A harder nut to crack, for sure.

But it must really be disheartening when one’s own medical bloggers start talking behind the scenes about the discontent and unhappiness in the company. Half the company’s medical advisers seem to have little relationship with the company (other than collecting an occasional check), and the other half are a little disconcerted the direction the company seems to be taking.

Which brings me to wondering out loud — who will benefit when Revolution Health merges or is consumed by another company? Will it be its remaining employees, a significant number of which will also be on the chopping block in a merger? Will it be the investors, who’ve already sunk an amazing amount of money into a company doing meager business? Or will it be a handful of executives again — much like in the drkoop.com days — who make out with their own golden parachutes on the consummation of some type of merger? I can’t help but wonder what executives with the company now have $1 million+ bonuses waiting for them on the consummation of a merger, all the while half the remaining staff will get shown the door.

I guess this is the nature of big business, whether it be technology or online health. I just sort of hoped that e-health would be different, especially with Steve Case behind it. That people would really stick to their hopes, dreams and mission, and not let quarterly market pressures determine their destiny.

Good luck, Revolution Health — I hope whatever becomes of you, you find a better fate than the late drkoop.com.

 

 

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