So, drkoop.com walks into its accountant's office two months ago. "I'm sorry," the accountant says. "Your balance sheet is in really bad shape. I give you four months to live."
Taken aback by the diagnosis, drkoop.com replies, "Well, I want a second opinion."
"OK, your income statement is ugly too."
Ba-dum-pah! Tisssss.
I've got more... but why really? It all boils down to wellness and it's clear that drkoop.com is in the process of downing a slice of humble pie for medicinal purposes. Jobs are getting cut. Expenses are being sliced. Buyout offers are being entertained. Wall Street views this as a company publicly making out its last will and testament.
But, where there's a will there's a way. And there is a way for drkoop.com -- a way out. I don't mean accepting an offer from what has to be countless potential suitors out there -- champing at the bit to take out this medical heavy hitter at a decent premium to today's price, but still a major discount to months past.
The buyout bonus will be nice -- if it even comes -- but I think drkoop.com can succeed and eventually thrive on its own. Even the most bearish analysts are expecting the company to report narrower losses going forward. After the $1.64-per-share deficit projected this year, the consensus just calls for a $0.58-per-share loss next year.
Of course, when you are dealing with a company with drkoop.com's besieged perception, "going forward" becomes more a question of survivorship than attainment. How will drkoop.com make it -- and why should it make it -- are clearly the two major issues here.
Let's take the second part first. According to Nielson ratings, dr.koop.com generated 64 million page views last quarter. That's not too shabby for a company that, earlier this very week, had a market cap of $64 million.
But, what I really like about drkoop.com isn't so much the raw quantity of those numbers. No, those are nice and all, but it's the quality of that traffic that attracts me. Many of the more popular sites are not final destinations. Folks wind up on the America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> home page only to bounce elsewhere. Users download Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> Internet Explorer software, then head elsewhere to try the browser out. Portals like Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> and Lycos <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> have done great jobs building out their content, but most online citizens wind up there only to be pointed somewhere new.
But "koopsters" come to stay, averaging eight page views per visit. They seek. They find. They engage. The drkoop.com community is telling in that, while the site offers so much hassle-free healthcare-related information, 1.3 million users have gone out of their way to register for the site itself.
Some might say it is the moneysaving and, dare I say, lifesaving content that keeps Internet surfers checking in time and again. Drug Checker is a resource worth bookmarking. Every year, 100,000 Americans die from the adverse effects of prescribed drugs. More than two million visits to the hospital are logged each year for that very reason. Doctors aren't perfect. It's easy to prescribe a drug that, in absolute terms, is perfectly healthy, but when combined with another prescription (from another doctor) or taken with certain food items, can prove harmful if not fatal.
You can check your own drug regimen and test it against any new prescription through Koop's drugchecker.com. It's an amazing resource and the company has the testimonials to prove it.
Granted, those who paid four times last summer's $9-a-share initial public offering (IPO) price aren't feeling too well right now. They probably wish they could go back in time, punch "drkoop.com" and "paper profits" into Drug Checker, and get back a "do not mix" reply. But, this Duel is not about looking back, it's about looking forward. It's about symptoms, sure, but it's also about the cure.
A few things have happened to improve drkoop.com's prospects since the accountant's dire prognosis back in March. Last month, AOL and GO.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GO)") else Response.Write("(NYSE: GO)") end if %> reworked marketing deals with drkoop.com. They will now accept equity in place of legal tender for promoting Koop's site. This was a major step to stretch available dollars, but what most investors fail to realize is that the portal heavyweights -- not drkoop.com -- had the most to lose here.
AOL's business model calls for substantial contracts from companies in exchange for keywords and/or exclusivity and exposure. Of course, drkoop.com penned these in better times but, now that the spotlight is on, who has more money at stake here? If a company like drkoop.com buckles under, it would be like pulling out a bottom-dwelling deuce from a house of cards. AOL and GO.com need drkoop.com solvent to prove their point about the merits of online sponsorship -- and now they need to see it through the eyes of fellow investors too.
That puts drkoop.com in an interesting position, where just about every scenario is intriguing. OK, yes, the over-predicted take that drkoop.com runs out of money and closes shop by the end of the year, with shareholders flatlining, is possible. Of course. But, so much more is now possible. After all, medical students operate on cadavers because there is nothing left to lose. Things can only get better for drkoop.com. In fact, they already have.
For starters, between the layoffs and the reworked marketing arrangements, drkoop.com has improved its financial outlook. It has more time to work its content revenue streams.
Streams? Yes, because Dr. C. Everett Koop is as ubiquitous as can be in this realm -- I mean, c'mon, how many other surgeon generals can you name? -- the site was able to quickly carve itself a dedicated following over bland, generic-named sites like HealthCentral.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HCEN)") else Response.Write("(Nasdaq: HCEN)") end if %> and Healtheon/WebMD <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HLTH)") else Response.Write("(Nasdaq: HLTH)") end if %>. While sales were all of $43,000 back in 1998, they soared to $9.4 million last year. This past quarter alone, the company rang up sales totaling more than half of last year's tally too.
Sponsors love targeted marketing, and drkoop.com has clever moneymaking deals on that front. For instance, NutriSystem sponsors the company's Weight Loss Center. From skin care to alternative medicine, the sponsors are paying for drkoop.com the landlord (similar to AOL -- except I don't think Steve Case can pull off the gray muttonchops goatee look). As lesser online health companies fade away, the premiums drkoop.com will be able to command will no doubt rise.
And, come to think of it, so will the stock.
This Week's Duel
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