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Tuesday, December 11, 2012

Decline in Online Drug Advertising Leads to 14% Downsizing at WebMD

There is no better bellwether for the state of online pharma advertising than the health of WebMD, a leading website that depends on health industry -- mostly pharma -- advertising.

In a press release, WebMD announced today "a comprehensive program to streamline its operations, reduce costs and better focus its resources on increasing user engagement, improving customer satisfaction and driving innovation." By "streamline," WebMD means laying off 250 employees, about 14% of the company's workforce.

According to Tech Crunch:
"During its most recent quarterly results, the company saw revenue decline from $135 million during the year ago period to $117 million, with sponsorship and advertising income especially taking a downward turn. WebMD reported a net loss of $900K on the quarter, compared to positive income of $14.2 million during the same quarter last year. Still, its site traffic continues to grow, according to its quarterly financials, with 22 and 24 percent increases for unique visitors per month and page views between Q3 2011 and Q3 2012. So what’s behind the losses and the resulting need for budget cuts? Despite a growing audience, it seems like advertisers are either less interested or less able to create campaigns on WebMD."
Back in January, I noted (here) that the Wall Street Journal reported that WebMD's Chief Executive Wayne T. Gattinella resigned, and the health-website operator "called off a search for a buyer as it braces for weaker financial results this year. A key issue, the company said, is pharmaceutical companies holding back on spending as they deal with expiring drug patents." (see "Dip in Drug Ad Spending Leads to WebMD Woes").

It appears that a significant portion of WebMD's woes is due to one product going off patent: LIPITOR. As I predicted, Lipitor (or lack thereof) Holds Key to DTC Ad Spending in 2012 (see here).

P.S. I was interviewed by a reporter at MarketPlace.org for the following segment that aired on December 11, 2012:

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