How do you lose $1 billion per quarter? 5/10 ReleVents hed: WebMD: Heal thyself dek: How do you lose $1 billion per quarter? By James Mathewson
As news over the wire continues to stream in about huge dot-com losses and layoffs, I’ve grown a bit desensitized to it all. This company posts $20 million losses; that company lays off 200 employees; blah, blah, blah, whatever. But even my glassed-over eyes couldn’t ignore this news story about WebMD’s $1 billion loss last quarter. When I read the feed, my jaw just about dropped.
What is even more astonishing is the fact that someone managed to put a positive spin on this story. Reading into it, I find that WebMD actually lost $1.35 billion the quarter before. So, it seems the company is going in the right direction. News of improved losses actually caused the stock to climb a half buck or so, even though last year at this time, the company lost a mere $431 million.
My question is, how do you lose this kind of money on a content site? The company says it plans to lay off some 1,450 people this year. So it might save $7.25 million or so for the year. But that’s a drop in the bucket when you’re talking about losing $4 billion a year.
Here’s the clincher: The company brings in less than $200 million per quarter, and its revenues are falling. So it’s spending $1.2 billion per quarter on content, acquisitions, and brand building amidst the sharpest downturn in a half century. They’ll own the market for consumer medical information over the Web, but there is no way in Hades that market is worth $10 billion–the total bill once the company burns all its cash.
I know we all need more medical information, but we already have access to free information, and our doctors subscribe to all the respected medical journals. How much will consumers pay for slightly more robust services than they can get free from other sources? Every way I figure it, it just doesn’t add up. Who says venture capitalists are impatient?
James Mathewson is editorial director of ComputerUser magazine and ComputerUser.com.