Hopkins set to try Web as income source Electronic marketing of health information faces competition

Lots of free data lurking

InteliHealth venture entering vibrant era on the Internet

July 14, 1996|By M. William Salganik and Timothy J. Mullaney | M. William Salganik and Timothy J. Mullaney,SUN STAFF

It's glitzy. It's cutting-edge. It's Hopkins-approved. But is it a business?

Last week, the Johns Hopkins Medical Institutions announced a venture with a $25 million start-up company called InteliHealth to market health information on the World Wide Web and in other innovative ways.

Hopkins said it was seeking both to provide information that would keep people healthy and to develop a new revenue source.

In a sense, this is simply an extension of efforts by medical centers in the past decade to make money on consumer health information. Hopkins has pulled in between $2.5 million and $3 million over the last seven years from royalties on newsletters, books and "white papers." It is working on a health encyclopedia to be published by HarperCollins. And Harvard, the Mayo Clinic and other top medical institutions have sold information in the forms of guides and CD-ROMs.

On the other hand, on the Web, in health or otherwise, there's no track record for how to price subscriptions or advertising.

"Everybody's in the learning phase now. The economic model that will win out is not clear," said Peter Barris, general partner at New Enterprise Associates of Baltimore, a leading venture capital firm that has invested in several online publishing start-ups.

And the Hopkins effort will compete with lots of free health information already on the Web. "There was a time when if you typed in "Alzheimer's," [into a Web search program], you got five or six things, and two of them were good. Now, you get 25,000," said Dr. Richard Friedman, a professor of medicine at the University of Wisconsin and developer of the "Internet Health Guide."

And the competition will be increasing. The same day as the Hopkins announcement, AT&T said it was beginning a similar Web site with information from the Mayo Clinic.

Scott L. Sherman, assistant dean of the Hopkins School of Medicine and director of its consumer health marketing efforts, said he's not worried by the competition -- "There's Coke and Pepsi, there's Hertz and Avis, there's Burger King and McDonald's; there's room for more than one player in the field" -- or by the uncertainties of Web revenue.

Hopkins picked Inteli- Health, he said, in large measure because of a business plan with "a multiplicity of revenue streams." In addition to potential advertising and subscriptions on the Web, InteliHealth expects to license Hopkins-branded information to other Web sites and to tie in catalog sales of health products.

When it comes to selling advertising on the Net, many have called out to advertisers but few have been chosen.

Advertisers spent an estimated $54.7 million for online advertising last year, according to the New York consulting firm Jupiter Communications -- less than 1 percent of total U.S. advertising spending.

One site leading the way toward a Web supported by advertisers is "HotWired," an electronic cousin of Wired magazine -- but the prospectus for Wired Ventures Inc.'s upcoming initial public offering says the site's advertising revenues were only $500,000 in the first quarter of 1996.

"HotWired" is not cheap. The company claims its advertising costs $150 per thousand viewers -- compared with $7.64 per thousand homes for nighttime network television, according to the Television Bureau of Advertising. Even much cheaper Web options such as ESPNet cost nearly $21 per thousand viewers.

"The [cost per thousand readers] is astoundingly high" for Web advertising, said Sean Carton, director of interactive media development at the Baltimore advertising agency Richardson, Myers & Donofrio. "It's ridiculously expensive for what you get, but that will come down."

Furthermore, leading electronic publishers like HotWired and C/Net, whose parent company went public July 2, have not shown they can appeal to consumer products companies that spend the bulk of America's advertising dollars. "The whole concept of advertising on the Web, as a technology-rich environment, is more comfortable for tech companies," said Lon E. Otremba, C/Net Inc. executive vice president.

He said consumer product companies dabbled early in Web advertising, but have retreated because the Web is most effective at ads that convey information rather than images, which are the core of TV advertising.

Most of the publishing ventures New Enterprise has backed differ from Hopkins' new business in key ways, Barris said. For one thing, most are aimed at providing information to businesses rather than consumers. "It's a more competitive market when you focus on consumers," Barris said. "The profit margins are not as high because they won't pay as much, and the pain [of not solving problems] is not as high."

It's clearly a very competitive market in Web health information. Massachusetts General Hospital has a Web site with links to 321 other hospital sites. Medical schools, insurance companies, government agencies and advocacy groups all have Web sites.

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