WebMD Benefits From Shift In Healthcare Advertising, Hopes To Thwart Perils Of Ad-Blocking Apps

| About: WebMD Health (WBMD)

Summary

Healthcare companies year-over-year are pouring more resources into targeted internet advertising.

WebMD provides excellent educational resources for doctors and the layperson.

The future for display advertising, which WebMD relies heavily upon, appears murky as ad blocking software is actively thwarting the bottom line by limiting user engagement with ads.

WebMD (NASDAQ:WBMD) is a media company that operates WebMd.com and WebMD magazine for consumers as well as Medscape for healthcare professionals. Their revenue is derived from advertising placed by healthcare companies hoping to target consumers and physicians within their respective spaces.

There is still additional room for growth in the advertising space for pharmaceutical, biotechnical, and medical device companies that seek to expand their brand. In recent years, the number of expensive salespeople from the pharmaceutical field has diminished across a number of companies, which are now in favor of pouring more funds into targeted online advertising. WebMD offers the ability for advertisers to target pages providing information about specific ailments that consumers may have or that doctors are seeking to learn more about. Advertisers are all too willing to pay a premium for the ability to put their messages in front of these users.

While much of the contracts WebMD has with advertisers only last for "four to twelve months," the nature of online advertising is such that companies are constantly tweaking their ad campaigns in order to achieve the highest return for their investments.

With 207 million monthly unique visitors in 2015 alone (representing a 13% jump from 2014), it is clear that the demand is high for free healthcare information and that WebMD is a well-known provider. However, the biggest threat to WebMD's business model is the numerous ad-blocking software programs that curtail efforts by advertisers to deliver their messages. This represents a problem across most parts of the Internet and may affect revenues in the years to come.

In an effort to further expand their brand, WebMD expended resources to create 165 videos on various topics, which could be shared on social media. These videos seek to inform and direct viewers to use their resources in a more organic manner. In addition, their iOS/Android app introduced in January of 2016 has been well received.

Shares have also enjoyed a nice appreciation this year, with current shares 62% higher than last year's lows during last September. With acquisition discussions occurring earlier this year, the possibility of management changing their approach or a scintillating new offer coming in means that a potential jump is possible at anytime. For example, WebMD's stock jumped 5% after the news of a potential acquisition came out. A similar jump is certainly possible if healthcare companies see WebMD as an accelerated path towards gaining a strong online presence.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.