This post was originally featured on HIStalk.
I may be sitting on a high horse, but I have a fundamental problem with businesses that don’t have a monetization strategy from inception. The concept of "let’s build a user base and figure out how to make money off it later" is a recipe for failure. Facebook and Twitter did it successfully, but they’re the exceptions among the exceptions.
The vast majority of businesses that have employed the same model never make money, even after raising tens if not hundreds of millions of dollars. See Pinterest, Path, Instagram, Mailbox,FourSquare, Shazam, Tumblr, SnapChat, and Tinder as examples. Some of these businesses were lucky enough to be purchased at ludicrous valuations, but that’s not a bankable model. No one could have possibly foreseen those acquisitions.
The low-hanging fruit in mobile consumer applications has been picked from the proverbial money tree. As such, the Silicon Valley (SV) echo chamber has turned towards healthcare.
"I have a $6 trillion addressable market!"
"Management is clueless and ass backwards and doesn’t know how to use technology! I’ll show them how!"
These are some of the most common and superficial jabs (and business justifications) that SV entrepreneurs throw around when talking about entering healthcare. With a fridge full of Red Bulls, an insatiable appetite, and a dose of crazy (good) naiveté, they set out to… sit at their desks and write code all day and night. Good for them. We don’t need any more email or task list apps.
Since they don’t know much about actual healthcare operations, they address patient-facing problems. That’s where most of them fail. Unfortunately, patient-facing healthcare applications are, generally speaking, an even worse idea consumer centric applications:
1. Patients aren’t willing to pay for healthcare services (Obamacare), nor do they care about their own health (obesity and smoking rates). Contrary to popular belief, Northern California isn’t representative of the rest of the country.
2. The #1 challenge facing consumer applications is behavior change. This problem is particularly true on mobile, where there’s limited screen real estate and where apps are bounded by Apple’s and Google’s miserable app stores. This stands in stark contrast to the open and accessible desktop web, where everything originates with a Google search. Many consumer-centric healthcare apps are simply never found, or if they are, they’re downloaded, only to be deleted shortly after initial use.
Combining the top two above, The only patient-facing apps that have successfully monetized are those that charged someone else access to the patient’s interaction with an app. See ZocDoc, iTriage,WebMD, PatientsLikeMe, HealthyLabs, HealthTap, Simplee, and RunKeeper as examples. Fundamentally, they employ a similar model to Google: feed referrals to organizations that want targeted, qualified referrals.
Healthcare entrepreneurs, please pursue ideas with a viable revenue model. There’s nothing more painful than calling your investors and asking for money than you originally planned for because you can’t monetize your user base. There are still plenty of opportunities that are patient facing, but please ensure that there’s someone who will pay for your referrals.