Any Quarterly Announcement press release that leads off with anything but the financial numbers usually signals trouble. WebMD is no exception.
Just got off the WebMD first quarter conference call. Knew it was going to be one of those calls that did not have cheering from financial analysts as they began their questioning with something to the effect of: ” Great results, you really are hitting your numbers, yada, yada, yada…”
No, this was going to be subdued as the company gave everyone fair warning with a pre-announcement that advertising revenue is expected to not grow as fast through 2008 as originally forecasted.
In the call today, WebMD honchos were quite pleased with the number of unique visitors in Q1, now at 51.9M/month, nearly a 25% increase over last year. They were so please with these numbers, they used them as th title for their Q1’08 press release. This translated into overall revenue up 17%, with advertising up 23% while what they call “private portals” (which is really their PHR solution) growing at 9% year over year.
Looking Closer at WebMD PHR Performance in Q1’08
Digging a little deeper into what was said on the call regarding the PHR solution, WebMD saw the number of clients grow from 103 to 122, an 18% growth rate. But if client growth is 18% and they are only experiencing 9% revenue growth, it would appear that they are seeing some significant pricing pressure in the market. And that 18% growth in new clients is substantially below most of their much smaller competitors. Granted, it doesn’t take many clients to boost the growth of small competitors, but when I hear from one PHR vendor that they have had a doubling in the number of clients in each of the preceding two years and now have nearly triple the number of clients as WebMD, it makes me begin to wonder if WebMD is really capitalizing on the growth that is occurring in this sector.
Another thing I found disturbing in the call was the lack of discussion about WebMD’s initiatives in the PHR space. They discussed the competitive solution to Sermo, Physician Connect (now with 20k physicians registered), they talked about expansion overseas (not very informative and what they did divulge was not all that great), they talked about how popular their new magazine, WebMD is (even though the publishing group is still bleeding $$$) and they discussed Health Check, (they claim it is a success, but honestly, I don’t see it and they were not specific as to what metrics they were using to define success). And they spent a lot of time talking about a bunch of student loans they are holding and haven’t been able to sell at auction leading them to having to take a $27M impairment charge (geez, even these guys got caught up in the whole financial mess). The only mention of the PHR (private portal) business was a simple statement on growth, some new clients (Walt Disney and Newell Rubbermaid to name a couple), but no talk about how they are improving this platform, new initiatives, strategies to further penetrate the market. NOTHING!
Really makes me wonder if they are just milking this cash cow and looking for opportunities elsewhere that will be easier for them to defend in the future as the PHR market becomes increasingly more competitive.