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Click where it hurts
By KRIS HUNDLEY © St. Petersburg Times, published January 15, 2001
In the Web world, just having great content won't cut it. Few people know that better than the founders of Gold Standard Multimedia Inc. in Tampa and eMedicine.com Inc. in St. Petersburg. The two local companies have targeted the medical field with complementary online products: Gold Standard's are directed at medical students and pharmacists; eMedicine's appeal to medical practitioners. Since the dot-com boom went bust in April, it has been easy to ridicule half-baked ideas to sell sofas, dog food and high fashion on Web sites that sucked up millions of dollars without a prayer of making it in the marketplace. But as Gold Standard and eMedicine illustrate, even entrepreneurs who offer life-saving information over the Internet are struggling. Gold Standard was started in 1993 by Jon Seymour, a radiologist who chose entrepreneurship over a residency. While a student at the University of Florida's medical school, Seymour developed an electronic version of his radiologic anatomy class. After graduating, he went into business expanding his electronic med school curriculum and developing an electronic drug reference guide. Now available online, Gold Standard's products have hundreds of thousands of users but meager ad revenue. EMedicine was started four years ago by Scott Plantz, an emergency room doctor at St. Anthony's Hospital. Plantz's goal: put comprehensive, constantly updated treatment guides in 56 medical specialties on the Web. The first book, in emergency medicine, has been available since 1998. Portions of the other 55 have been accessible to online viewers as editors sign off on material; complete versions will be available in March. The texts have been attracting more than 1-million hits a day. Though Plantz, eMedicine's chief executive, expects the company to become profitable by mid-2001, it still is burning money faster than it brings it in. Plantz was lucky enough to capture venture capital before the market cooled last spring. In April, he got $14-million from HIG Capital of Miami and New York-based Omnicon Group Inc., which owns ad and marketing companies worldwide. Seymour, who had been preparing to take Gold Standard public when the market collapsed, still is chasing capital. "We weren't prepared with experienced management to jump through (the IPO) window," Seymour said. "Then we were scrambling from behind. By the time we had it all together, the market was moving away from us." Plantz and Seymour are well aware of each other's efforts, and they've formed a loose affiliation, with links to each other's sites. But when it comes to survival, they're on their own. eMedicineEMedicine sprang from Plantz's frustrations with the traditional method of publishing medical texts. A former assistant professor at Chicago Medical School, Plantz has written 11 medical texts. The books routinely take four to six years to complete and, he says, are hopelessly outdated by the time they are published. As a frequent lecturer at medical schools overseas, Plantz also had been besieged by requests from foreign professors for old medical texts. In Central America, he saw a medical school's only textbook, ragged and outdated, kept under glass and chained to a pedestal. Joining with fellow doctor Jonathan Adler and software engineer Jeff Berezin, Plantz helped design programs that allow thousands of contributors and editors to write, review and update medical texts online instantaneously.
The professional texts, nearing completion, have involved 10,000 authors, editors and reviewers. Next up: a rewrite of the medical texts into layperson's language for general consumers and translations of the texts into foreign languages. Plantz and his financial backers see potential for application of eMedicine's publishing software to other fields. Craig Burson, principal of HIG Capital, said eMedicine's patented software was a big factor in his company's decision to finance the start-up. "EMedicine has broad-based software platforms that could do any publishing on the Internet," said Burson, adding that the company is in talks about partnerships with major publishing houses. "There's a lot of upside in other applications." Burson also says once eMedicine gets all its professional textbooks on-line, it can begin charging hospitals and doctors for the material it has been giving away. About half of the visitors to eMedicine's texts are doctors; 35 percent are nurses or other medical personnel. Average user time is 20 minutes. The biggest user of the emergency medical text is the military, which recently asked the company to add a section on biochemical warfare. "This could be a $100-million-plus company just with subscriptions," Burson said. "Their content is very unique, it's in high demand and it's not easily replicated. I think hospitals especially will be willing to pay for it." Plantz, a lanky 40-year-old who rides his bike about 3 miles to work from his home in St. Pete Beach, clings to the hope that the information will continue to be free for doctors in less-developed countries, while wealthier professionals might pay as little as $20 a year. EMedicine also intends to sell CDs, DVDs and downloadable versions for Palm handheld or electronic book devices. It also will sell hard copies of texts at prices from $29 for one book to $149 for the set of 56 books. That compares with typical prices of $200 for a single medical text published the traditional way. Other potential revenue channels include selling continuing medical education courses via the Web and recruiting more corporate sponsors. So far, about one-third of the books have sponsors, companies such as Kodak and Genentech Inc. that have paid $100,000 to $500,000 for exposure to eMedicine's users through corporate logos that appear on the title page of each book. Plantz defends corporate sponsorships, saying such companies have no influence over a text's contents. "A pharmaceutical company may tell us they have a new treatment and we'll check it out," he said. "But with five levels of peer review for each author's submission, any hype would be edited out." Though Plantz studied business and law before devoting himself to emergency medicine, he said he didn't know there was such a thing as venture capital when he launched eMedicine in 1996. He and Adler, eMedicine's president, took second mortgages on their homes and continued their day jobs. Adler devotes a third of his time to his position with Harvard University's residency program at Massachusetts General Hospital in Boston. In 1998, eMedicine got $1-million in seed capital from Tenet HealthCare Corp., which wanted to make the emergency medicine text available to doctors in its hospitals. Plantz and Adler began recruiting authors for the other textbooks, offering shares in the privately-held company, free continuing medical education classes and promises of royalties. Programmers and medical editors have been a bigger expense. Plantz, a native Nebraskan, searched Omaha for medically trained personnel with strong writing skills. EMedicine now has an administrative staff of 10 on Pasadena Avenue in St. Petersburg. Another 60 employees are scattered across the United States, and there are two in India. Plantz and Burson said one of the beauties of eMedicine's strategy is that while it will cost about $5-million to compile the 56 medical texts, it will take only about $1-million a year to keep them up to date. Right now, however, the company is burning through $500,000 a month. "I want to give these books free to the world," Plantz said. "But I still have to make revenues or the 1.5-million hours we've spent working on this project will be worthless." Gold Standard MultimediaAcross Tampa Bay from Plantz, Jon Seymour feels pinched but not panicked as he runs his 47-person company. "I've definitely been a little more cautious about cash for the last six months," he said. There were a few months during the summer when he didn't fill positions after employees left. "I feel like we could be profitable if we weren't in a growth mode."
"We targeted hospital pharmacies first, sending a free copy to anybody who'd take it," Seymour said. "Our revenue model was an annual subscription that included four quarterly updates." The electronic drug catalog, complete with color photos and drug interaction information, was a hit with pharmacists weary of thumbing through the Physicians' Desk Reference, the traditional drug reference text. In 1998, Thomson Healthcare Information Group, publisher of the PDR, bought 20 percent of Gold Standard for $5.8-million. Among retail chains that have contracted to use Gold Standard's drug information are Walgreen's and Eckerd Drug. Seymour said such licenses begin at about $10,000 a year and go up depending on the number of users per chain. At the same time the electronic drug reference was being developed, Gold Standard began putting more entry-level medical school courses into an electronic format. Seymour and a handful of sales people spent months traveling the country, hawking CD-ROMs to medical schools and their students. More than 75 percent of the nation's medical schools bought licenses for $1,000 to $15,000 per course. Seymour also sold plenty of $99 course CDs to students. But the Internet, with its promises of massive market share and lucrative ad revenue, beckoned. In 1999, the medical courses were put on the Web and in March, Clinical Pharmacology followed. Like other companies that have put their content on the Web, Gold Standard did so with the assumption that users expect information on the Internet to be free. So the company offered its treasured information at no charge. That's why usage has grown -- the drug reference book has more than 300,000 registered users -- but revenues haven't kept pace. Seymour said only 10 percent of Gold Standard's revenues come through ads and sponsorships of the company's medical curriculum. "We may look to different alternatives in the intermediate term," Seymour said. "We're looking for ways to change our revenue model without sacrificing market share." As more courses are added to the eight online, Seymour sees a time when Gold Standard will begin charging tuition. "We have the opportunity to make this into a true distance-learning product," Seymour said. Gold Standard's existing courses cover about half of the first two years of medical school, he said. "And two-thirds of all medical students, as well as two-thirds of all professors are already using our product, so we've got traction in that space." Another option is to adapt the coursework so that it can be used for continuing medical education credit by professionals as well as to train drug and medical device sales people. In October, Gold Standard formed an alliance with DigitalThink of San Francisco to create professional training programs that will be pitched to pharmaceutical companies and others who want workers exposed to a standard medical education. "We'll get paid for the content and DigitalThink will get paid for delivery and the platform," said Seymour, who also has licensed Gold Standard's medical and drug information to 30 Web sites. The company also hopes to increase revenue from its drug data through a recent contract with ParkStone Medical Information Systems, which is developing handheld devices for physicians. "That deal is a fee per doctor per month for unlimited access to our drug information," Seymour said. "We should start to see that revenue in the first quarter." Finally, Seymour has high hopes that the company's database of three-dimensional, anatomical imagery, currently being upgraded, will find commercial use for physician training. "The technology is nearly here to create virtual reality training, so a resident can have a surgical experience that is so close to reality it can be certified," said Seymour, who expects it could take two years for a virtual surgery program to reach the market. But developing products and partnerships takes money, and so far Seymour has been shut out in his search for about a $10-million capital infusion. After realizing late last year that a public offering was unlikely, Seymour returned to the private market but admits he might have been a little greedy. "I was looking for a little higher valuations than the market could bear," he said. "Now investors are poking holes in everything and I may choose to wait several months till the pendulum swings back to the middle. "But we're a good company, with good revenues. Things are going to change." eMedicine.com Inc.
Gold Standard Multimedia Inc.
Recent coverageHealth care at Internet speed (September 18, 2000) Surgeon's new operation: software company (August 13, 2000) Market's swing trips Web firm (July 11, 2000) 'Telehealth' license bill wins first approval (April 27, 2000) Cyberspace can be guide to better health (December 9, 1998)
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