WebMD Sale Reflects Trend Towards Smarter Spending in Pharma Advertising

Tim Armand

Tim Armand President and co-founder

By Tim Armand
President and co-founder, Health Union
August 1, 2017

Last month, headline writers had a field day dreaming up puns for coverage about several pharmaceutical companies’ decision not to run ads for erectile dysfunction drugs during this season’s NFL broadcasts.

And, while a connection to the recent sale of WebMD might not be immediately obvious, upon closer examination, these stories share a common theme. Both reflect the shifting sands beneath the pharmaceutical industry and how, in reacting to them, its marketers are being challenged to do more with less.

Earlier this year, I was interviewed for a trade publication article about WebMD’s announcement that it was exploring “strategic alternatives,” which could include a sale or merger of the company. At that time, WebMD CEO Dr. Steven Zatz cited “ongoing uncertainty in the healthcare landscape” and declining growth of pharmaceutical advertising revenues as contributing factors to the decision.

Looking back, I’m not surprised by the July 24 announcement that WebMD Health Corp is being acquired by private equity investors KKR/Internet Brands, which is paying a substantial premium on the share price. What did surprise me is that KKR would make a $2.8 billion investment in what many say is a declining market.

The absence of Viagra and Cialis ads during NFL games and the WebMD sale are examples of smarter and more targeted ad spending, a trend that shows no sign of abating.

While slow growth in pharmaceutical advertising revenues may be a reality for some, as the leader of a health-focused digital company, this has not been my experience. Health Union continues to experience substantial year-over-year growth in digital media revenue from the pharmaceutical industry. It’s not that pharmaceutical companies are spending less in digital advertising; it’s that their marketers are changing the way they spend digital dollars.

Today, digital health isn’t just about content or wearable technology, but, more accurately, about human connection. People with challenging health conditions want to learn, share, and bond with people who have similar experiences. Social media outlets create unique opportunities to forge real relationships that provide the empathy, validation, and support people need to improve their health and healthcare. Simply publishing information is no longer enough to attract and engage sufferers.

At the same time, marketers at pharmaceutical companies face shrinking resources, driving the trend toward increased accountability for advertising investments as they realize that broad reach is less important than engaging qualified patient audiences. A media platform that reaches tens of millions doesn’t matter when the patient population advertisers want to reach numbers only 400,000. With this in mind, media agencies are seeking to reduce waste and increase efficiencies, focusing not on the quantity, but the quality of interactions.

Such is the trend impacting WebMD’s declining growth in pharmaceutical advertising revenues. Many companies are shifting their digital spending to more targeted platforms that reach highly qualified audiences and holding those platforms accountable for results by employing independent, third-party measurement studies.

In a digital advertising world where quality and relevance are more important than sweeping reach, relationships matter. And these relationships are built and sustained through daily, relevant content, authentic social media conversation, and personal connections.

Digital health companies that can do these things—and consistently do them well—will continue to win larger shares of pharmaceutical advertising budgets by delivering higher audience quality, lower costs per diagnosed visitor, and better business results than “traditional” health content sites.