The only hope for survival, in my book, is a buyout offer from another company. Although, any buyout offers, if they do come, will be at bargain-basement prices. Every day, drkoop.com burns more cash, and that reduces the amount any given suitor might be willing to pay. Perhaps a savior will appear before drkoop.com hits bankruptcy, but I'm not holding my breath.
Rick points to the fact that analysts predict narrower per-share losses going forward. (Of course, this makes the assumption there is a "going forward" for drkoop.com.) I would like to point out that most of these reduced expenses are going to hurt the company dearly in the long run.
First, the company seriously damaged its employee base with the latest round of terminations. As I said in my initial argument, attracting and retaining top talent will be a joke for drkoop.com.
Second, the company really messed over AOL and GO.com by making each partner take stock for payment instead of the cold cash it previously promised. Future business partners will certainly think twice about dealing with drkoop.com after these two incidents.
Moreover, these reduced expected losses are reduced per-share losses, which sort of obfuscates the degree of loss reduction really expected. The company is now issuing dirt-cheap stock to pay its bills. Witness the AOL and GO.com deals, with more deals certainly to follow. This has the effect of greatly diluting the existing shares. Spread a huge loss over a large and growing number of shares and -- voila! -- a reduced loss per share. In addition, even when the company finishes slimming down, drkoop.com is still expected to be in the red and will be in a much weaker long-term position.
Just like I argued in last week's iVillage duel, page views and registered users don't mean diddly if you can't convert them into revenue and, eventually, profits. When you get down to it, drkoop.com is a content company whose main revenue stream comes from advertising. It also has paid handsomely to get the traffic figures that Rick cited. Remember, the company's sales-to-marketing expense ratio was somewhere near 5-to-1 in the first quarter.
I've actually used the drkoop.com site on a number of occasions. I do find it to be a fairly useful place for information. Much of what Rick said is true about the functionality and utility of the site. However, just because a company has a useful product, does not mean that it has a viable product or business model. Heck, give me a couple hundred million dollars to spend, and I could probably create a site people would visit, too! Spending investors' money is the easy part. Getting a positive return on investment is a skill that has eluded drkoop.com so far. Absolutely nothing indicates this will change in the future.
drkoop.com remains a company that is bleeding cash at an astounding rate, and it won't be long before it flatlines. Even if you don't believe that drkoop.com is headed for the morgue, there are some serious deficiencies with the company that should have investors thinking twice about trusting their hard-earned money to questionable management leading a firm in an increasingly poor position.
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