Case Analysis :
MedNet.com Confronts “ Click-Through “ Competition

Katherine Lee

Date : 2012/07/22

Executive Summary
MedNet , an award winning website, considered to be the best website for trusted, evidence-based, consumer health information for their non-professional visitor had 4.3 million of monthly visitors as of 2006, who visited or returned to MedNet only when they were“in crisis”. The products advertisement with MedNet from pharmaceutical companies usually enjoyed better image and higher chance of making a purchase because visitors tended to believe products advertised in MedNet were more reliable. MedNet provided information for free and generated profits from advertising sales by adopting revenue model of cost per 1000 impression. In the year 2007, MedNet started to face competition from search engine website, Marvel; non-profit comprehensive information providers; unproven therapies provider and specific-condition sites that focused on particular problems, such as Cholersterol.com. Among which, Marvel and Cholesterol were causing threat. According to the case, Marvel was essentially a large search engine using advertising model: contextual, or pay-per-click, banner advertising. Advertisers like Windham did not have to pay for each impression but for each click-through. MedNet had to prove their business model a better set up than what Marvel was offering to Windham so as to prevent Windham from shifting its advertising dollars to Marvel. Please refer to the relative analysis based on exhibit (2). It shows MedNet was really a better set up than Marvel. The exhibit(2) also reminds us another question that traditional advertisement via newspaper (actual purchase via call center ) also created very good contribution to Windham’s business. Before Windham perceived this, MedNet definitely needed to do something about it.
The other major threat, Cholesterol.com, was an aggressive group of niche, condition-specific website. MedNet needs to consider if it was wise to confront directly with Cholesterol.com by offering on-line recommendations as well. Alternative market is also an interesting segment, so long as they were providing information conservatively, with exclaimers.
MedNet could also extend its business coverage by evolving into a developer and manager of employer websites and created another cash cow for MedNet in order not to rely 100% on the advertising dollars for revenue.
Targeting a long term business development and growth of audience size, what more did MedNet need to do in order grow its business and create more value to its existing customers.
Nevertheless, MedNet should consider some side effects during the transition period. While company invested and allocated new resources on promotion or created a sub-division to drive cooperation with big employers developing and managing the health information intranets, these could decline the short term profitability. The board decision needed to be further convinced whether these action would bring positive results in the long run. Also how to serve the original visitors during the transition period with an equivalent quality they had always been enjoyed would be another task. 1) Decision statement
MedNet needed to assess whether they could 1) convinced Windham that their set-up was worth their advertising dollars. 2) persuaded Windham to bypass Cholesterol.com in favor of MedNet. 3) increased the audience size and brand presence to bring more value to customers who advertise in their website. 4) to got into business cooperation with large employers by providing health website information to their employees.
Internal and environmental Analysis : (A) Internal Strength and Weakness
On Exhibit (1), we reviewed MedNet’s strengths and weakness as well as the changing environment that affected the marketing strategy moving forward.
From the internal analysis, we could see that MedNet was in a good position to further expansion of its business. They had been a trustful health information website, with a very focused page on the products they advertised. Visitors believed in any information they’ve put on their website. This was a significant value to the pharmaceutical companies who gave advertisement dollars. However, MedNet’s customers only visited and return “in crisis”, which made them difficult to expand their current business scale. The brand presence was also limited, with only 4.3million visitors per month. (B) Competitors Analysis (Threat )
Based on the text of MedNet case, large search engine website like Marvel had a vast audience provided impressions for free and charged advertisers only a small percentage of click-through. Marvel followed the different advertising model by using contextual, or pay-per-click, banner advertising. Advertisers paid website owners only when visitors actually “ clicked” on an advertisement to learn more about an advertised product.
There were also nonprofit and governmental websites, like the U.,S. National Library of Medicine and World Health Organization with comprehensive information on alternative therapies as well as on scientifically based solutions.
For–profit health websites, Cholesterol.com, a niche condition–specific website that focused on particular problems had already posted a threat. The site had big marketing budget. They were providing interactive tools on which visitors could store data they wished to track, such as blood pressure, weight, or cholesterol counts. They had already stolen part of the pharmaceutical advertising budget from customers of MedNet, eg. Windham. Business model had made them quickly became the first web source that attracted people to visit routinely.
Furthermore, there were large corporations established their own intranet and offered employees with customized health websites for instant consultancy about the health problems.
Alternatives and criterias :
MedNet could have some options to increase its impression from visitors and strengthen its brand presence. It could get into the alternative therapies and remedies market. This could enhance the brand presence, but create of no instant effect in increasing the value for Windham. If they changed the business model by charging advertisers based on click-throughs, their revenue would immediately drop 80%. If they were providing interactive tools on which visitors could store data they wished to track and encouraging visitors to register with MedNet for free membership. It would make customers adhere to MedNet and encourage return visit rate. However, they had to watch out not to overly diagnose conditions and prescription for visitors so as not to get into risk of violating both state and federal government regulations.
Recommendation : 1) How to convince Windham that their set-up is worth their advertising dollars ?
Actual purchase rate produced by advertising with MedNet is higher than with Marvel. Please refer to Exhibit (2), the value proposition picture derived from the original exhibit 2,3,&4 of the MedNet’s case analysis, Harvard Business Publishing. This calculation shows us that the actual click-through rate for MedNet was 3%; and the click-through rate for Marvel was about 1.4%. Among 3% of the click-through rate from visitors to MedNet, 6% would click on the sponsor’s advertisement and make a purchase. ( Purchase rate of MedNet : 3% multiple by 6% =0.0018 =0.18% ). While only 2% of the visitors who will click on a health advertisement at a search engine website, like Marvel, and make a purchase( Purchase rate of Marvel : 1.4% multiple by 2% =0.00028=0.028%. ).
Furthermore, when we further calculated the contribution per advertisement cost of US$1000 that Windham invested respectively on MedNet and on Marvel, we found that MedNet with an output of US$2700 actually outperformed Marvel’s US$1667. That is, per US$1000 of advertisement cost that Windham invested with MedNet was better paid off than with Marvel.
2) How to persuade Windham to bypass Cholesterol.com in favor of MedNet ?
Product Advertisement of Windham on the website of Cholesterol might not be positive. According to the audience-auditing firm, the tailored recommendations about medical treatment on line could come dangerously close to diagnosing which might violate both state and federal government regulations ( and the laws of many foreign nations ). Legally, it requires a licensed physician to give recommendation and prescription to patients. Advertisements on a risky behavior website can result in a negative and untrusted image for Windham. 3) How to increase the audience size and bring more value to customers who advertise in their website ?
It is a must for MedNet to create traffics and enhance its brand presence so as to produce more opportunities in making actual sales:
(A) Again in examining the value proposition in the Exhibit (2), MedNet can not overlook the powerful promotion effect via newspaper channels. The Contribution of the advertising cost per US$1000 spent on newspapers channels (US$2818) actually generates similar high value as MedNet (US$2700) for Windham. MedNet has to bear this in mind and started to invest on newspapers advertisement both to increase brand presence of MedNet and product promotion of their advertisers.
(B) MedNet can also create another information sector to provide information on alternative therapies or remedies in a more conservative way; that is, to select only scientific studies over acupuncture. Adding information on alternative therapies can also broaden brand presence and increase traffic.
(C) It also recommended that MedNet encourage the visitors to register with their websites and become members. This can make visitors become more adhere to MedNet and become willing to return for routine visit to MedNet’s website.
(D) It is strongly recommended that MedNet also establish a sub-division to promote its health information service by linking to the intranet of big employers providing consultancy to to big employers. MedNet’s strength in integrity and management expertise put them in good position in pursuing this segment of growth. This could create another source of income for MedNet without 100% relying on the advertising revenues.
Action Plan :
Based on the recommendation, I suggest priority for MedNet is to carry out immediate promotion on the newspaper to get instant growth in the traffic as well brand presence. Also, it is important to establish another sub-division by hiring more sales to get into negotiation with big employers and provide health information service to their employees. It will create another positive cash flow for MedNet without 100% counting on the advertisement income.