Internet advertising is a zero-sum game. The only way these companies will make money is by offering a product or service for which the public is willing to pay. Health information is available free at dozens, if not hundreds, of websites.
The failure of the advertising model will play itself out over the next 4-8 months. Thus far, however, my "evidence" is the failure to date of ONHN, WebMD, KOOP, MCNS and the others to derive meaningful advertising revenues, when the number and quality of competitors will only increase going forward, and the plummeting market caps of these companies.
I am an "expert" (your word, not mine) because I have contacts in the advertising industry and with executives at Internet health-care companies, and have spent considerable time and resources researching and analyzing these issues to my own satisfaction. I don't particularly care whether you accept my views or not.
As far as the idiotic sell-side analysts are concerned, why don't you look up the "strong buy" recommendations awarded to CMI, FPA, Coastal, Phymatrix and other PPM companies, as I discussed a few posts ago. You might even find that the nitwit analyst who thought MCNS was going to 40 or 50 (what does he say NOW?) is the same guy who said CMI would go to 35, just as it began its slide into insolvency.
How many shares did the institutional investors in MCNS get for their $51 million? When can they sell? Keep in mind that for every MCNS that turns out to be a poor investment, there may be another company that appeared to them to be a similar risk at the time they invested that more than makes up for their MCNS loss. That's the nature of venture capital.
I am not short KOOP, MCNS or any of the others, although that's not something I'd brag about because shorting these things would've ranked among my (or anyone's) alltime best investment decisions. I do, however, have a large position in StayHealthy.com, which also provides authoritative health information online but which will not be relying on advertisers for its revenues. Watch the newswires very carefully over the next couple of weeks and, in the meantime, think about what the charts of these stocks are telling you:
(all together now)
"The advertising model does not work." |
