APRIL 20, 2007
MedNet.com Confronts “Click-Through” Competition
It was just 9:30 a.m., and the day was off to a terrible start. Heather Yates, vice president for business development at MedNet, walked at a quick clip down the hall of the company’s modern Birmingham, Alabama, office space, her face clouded with concern. The company, a website delivering health information free to consumers, generated its income through advertising, mostly from pharmaceutical companies. Now, Windham Pharmaceuticals, MedNet’s biggest advertiser, had asked to change the rules by which it had done business for the past four years. Moreover, Mahria Baker, Windham’s CMO, had told Yates that this wasn’t just an exploratory conversation. Windham was seriously considering shifting its MedNet ad dollars to Marvel, a competing website with which Windham already did some business. Yates, who had been with MedNet since just after the company was founded in 2002, felt blindsided and, at the same time, resigned. “We have some legwork to do,” she thought to herself. “We can’t afford to say ‘No,’ and just walk away, and we can’t just ask them to stay with us because we’re good people. We have to convince them that our set-up is worth their ad dollars. And we have to move quickly. Our other advertisers won’t be far behind Windham.” She had asked Baker to fax over a copy of the results of Windham’s latest advertising campaign, and had promised to call her back the next day, as both companies needed to finalize their budgets. Then, immediately after they had hung up, Yates had called Bill Bishop, MedNet’s vice president of consumer marketing. “Can you clear some time for me right now?” she had asked him. “Windham is thinking of pulling their ad dollars from us and taking them to Marvel.” Now she was on her way up to Bishop’s office, two floors above, with the fax from Baker and notes from her conversation in hand.
Industry Background and Company Origins
MedNet had launched its website with three goals: to provide scientifically based medical information to a nonprofessional consumer audience; to provide this information for free; and to generate profits from advertising sales. In a year, it had met all the goals; by 2006, it generated $1 ________________________________________________________________________________________________________________ Allegra Young has been a marketing manager and director in several national firms; she is now a principal consultant with I+O Communications in Austin, Texas. This case, though based on real events, is fictionalized, and any resemblance to actual persons or entities is coincidental. There are occasional references to actual companies in the narration. Copyright © 2007 by Harvard Business School Publishing. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School Publishing
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million in profits. (See Exhibit 1 for 2006 income statement.) The accessibly written, easy-tonavigate, and vividly presented content was developed by 24 trained journalists, doctors, designers, and administrators. Additional materials came from the faculty of a prominent medical school, news agencies, a photography service, and an active community of visitors that used social media tools such as blogs, community chat, and virtual reality to communicate medical information. (Visitorgenerated media was reviewed by medically trained journalists.) The award-winning site was considered the best health website for trusted, evidence-based, consumer health information. Advertisements on...