Major money starting to flow on the Web

Michael OReilly

CMAJ 1999;161:1017

In fact, health care is one of the hottest areas of the overhyped e-commerce revolution taking place in cyberspace. As John Fitzgibbon of Redherring.com (www.redherring.com), an online company specializing in economic analysis, puts it, the magic words for businesses these days are "online and health care."

In recent months, millions have been spent setting up new Web-based services or buying existing ones. A giant American pharmacy chain, CVS Corp., bought online drug retailer Soma.com (www.soma.com) for $30 million. CBS Corp., which owns the No. 1 US television network, is spending $150 million for a 35% stake in Medscape Inc. (www.medscape.com). And in the biggest deal yet, Healtheon (www.healtheon.com), based in Santa Clara, Calif., agreed to buy WebMD of Atlanta.

This deal is valued at $5.5 billion and included investors such as Microsoft. This new company has since announced a plan to use $215 million in stock to buy Greenberg News Networks Inc., a privately held medical news service.

Everywhere one turns, it seems that cyber-millions are being made. One day after launching his service DrKoop.com (www.drkoop.com), former US surgeon general Dr. Everett Koop was a multimillionaire. Even Dr. George Lundberg, who was recently fired by the Journal of the American Medical Association, has found a new home on the Net. He is the new editor-in-chief at Medscape.

The new drkoop.com site is typical of the sites that are attracting major investment. It features free health news and medical advice from Koop and other experts. The site also ranks 1400 other health-related Web pages and provides a chat room, which lets some of the 1.3 million people who visit the site each month talk to one another online.

The companies that have made the leap online see the road to their future painted in bits and bytes. A recent federal conference on the state of e-commerce reported that 10% of global business will take place in cyberspace by the year 2003 (Report on Electronic Commerce — The Future is Now, strategis.ic.gc.ca/SSG/it05062e.html).

Speaking at that conference, Andrew Bjerring, the president and CEO of the Canadian Network for the Advancement of Research, Industry and Education, concluded that within 5 years the value of e-commerce in Canada will reach $80 billion to $115 billion.

But despite all the big dollars floating around, some analysts wonder how much is real and how much is hype. For example, in the first quarter of this year, Healtheon actually reported losses of $18.6 million on revenues of only $17.6 million. Balanced against the multibillion-dollar buyout deal it announced recently, one is left wondering what is really happening.

As Keith Benjamin, an Internet analyst quoted in a recent Reuters article, puts it: "Stock prices will tend to mirror underlying fundamentals over time. . . . Our challenge is sorting through the short-term craziness of stock-price patterns that seem unlinked to any traditional measures of value."

Still, there is no doubt health care is big e-business. Millions of people surf the Web each day in the search for health information, and that number is skyrocketing. Cyber Dialogue Inc., an industry research firm, says that more than 17 million Americans searched online for health and medical information in 1998. In 1999, that number is expected to double.

"The Web is revolutionizing access to health care information," Lundberg said in the press release announcing his new job with Medscape. "Trusted information is the world's most powerful medicine and can make the difference between life and death. Medscape makes the information freely available 24 hours a day, 7 days a week, to anyone with a connection to the Web."

The question is, will that availability — and the obvious public interest — translate into real money? — Michael OReilly, moreilly@cancom.net

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