October 3, 2008 11:24 AM PDT
Two online health site operators to announce a merger
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In a deal that threatens WebMD's dominance in the health care space, Revolution Health Network plans to announce on Friday that it has merged with Waterfront Media, a publisher that owns several health Web sites.
The deal, valued at $300 million, would give the combined companies enough traffic in the United States to compete with WebMD, now the market leader in the online health category.
"We think we have the wind at our back, and can pass them," said Steve Case, Revolution's founder, referring to WebMD. He said the combined company could "really be the new leader in this category, which is a hot category."
The new company will operate under the name Waterfront Media. Waterfront, based in Brooklyn, N.Y., runs several sites called the Everyday Health Network. The Revolution Health Web sites will be absorbed into that network.
Benjamin Wolin, the co-founder and chief executive of Waterfront, will remain as chief executive, and Case will join Waterfront's board.
"This deal is, obviously, a great way for us to vastly expand the portfolio," Wolin said.
Case will continue to run Revolution, which was the parent company of the Revolution Health Network, which is based in Washington, and will continue to be involved with health companies apart from the network of Web sites.
Case, the co-founder of America Online, left that company in 2003 after selling it to Time Warner. He founded Revolution in 2005, and the Revolution Health unit in 2007. Revolution, whose backers include Carly Fiorina, the former chief executive of Hewlett-Packard, and Colin Powell, invests in a mix of companies, including Zipcar and Exclusive Resorts. Revolution will be a major investor in the expanded Waterfront Media.
"Clearly, getting strong CEOs to run each of the companies is our strategy," Case said. "Ben's done a great job building a company."
WebMD has also been expanding. In September, it announced that it would acquire the site QualityHealth.com for $50 million and an additional $25 million based on performance.
Wolin said that Waterfront was profitable on revenue of $50 million last year, though he declined to provide a specific figure. For 2009, he is projecting the company will have revenue of more than $100 million, and will again be profitable.
The new company will operate 24 sites, including RevolutionHealth.com, and HealthTalk.com. The Everyday Health Network already includes EverydayHealth.com, along with niche sites like SouthBeachDiet.com and the pregnancy site WhatToExpect.com.
Everyday Health was the second most popular health site in July 2008, with 14.7 million unique visitors, according to ComScore Media Metrix. The Revolution Health sites came in third, with 11.3 million visitors. Though traffic varies month to month, the July figures would put the combined companies ahead of WebMD, which had 17.3 million visitors that month.
In the last year, health sites have grown quickly. The number of visitors has increased 21 percent, outpacing the 5 percent increase in total Internet users United States, ComScore said.
Terms were not disclosed.
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