Analysis: The meds stop working so WebMD needs a makeover Wed Oct 17, 2012 2:58pm EDT (Reuters) - Parents worried about their toddlers have long turned to the WebMD website to check symptoms, but the popular site now needs a doctor itself as WebMD Health Corp suffers from a fall in advertising by budget-slashing pharmaceutical companies. The ad crunch comes as WebMD struggles to overcome issues with the way consumers use its sites -- jumping straight to the information on diabetes, for example, and then not hanging around once they get the information they want. "What WebMD needs to do is figure out how can they get the next level of user engagement and in turn use that data in a way that can help pharmaceutical companies realize that there is real value in the platform," said Stifel Nicolaus analyst Steve Rubis. The company collection of website, led by flagship www.webmd.com, was ranked No. 1 in health in the United States by online data tracker comScore Inc in September, but competitors such as EverydayHealth (www.everydayhealth.com) are better at turning eyeballs into revenue. WebMd's latest quarterly report in July showed that while the number of unique users rose 29 percent to 106.9 million and page views grew by 25 percent, the company posted a loss and its advertising revenue fell 20 percent. WebMD is trying to improve the "stickiness" of its sites, which also include www.MedicineNet.com, www.eMedicineHealth.com and www.RxList.com, to make them more attractive to advertisers. The changes include adding general well-being tips and advice, and creating mobile apps to help users track their health. "Nowadays there is a lot more emphasis on the return-on-investment and being able to show exactly what you are getting for your advertising dollar," said well-known pharma marketing blogger John Mack, also known as "Pharmaguy." The slide in advertising coincides with the end of patent protection on many blockbuster drugs and the pharmaceutical industry's increased focus on niche treatments, which are better promoted by tightly targeted advertising. Drug companies also want assurance that advertising works. EverydayHealth, ranked no. 2 by comScore among health sites and WebMD's closest rival, uses data to show clients how advertising with its site leads to an increase in prescriptions. "We use that data to make sure that the advertising is targeted, and then to prove that our marketing actually works," EverydayHealth Chief Executive and Co-founder Ben Wolin said. Plans for a similar approach by WebMD, in which activist investor Carl Icahn last reported a stake of 13.3 percent, is aimed at helping to convince clients that marketing translates into sales. Most of WebMD's current revenue comes from its consumer portal business. The company also owns a subscription-based site for physicians and health professionals, Medscape.com, and provides private health portals to employers and health plans. WebMD has already started to highlight more consumer-friendly and lifestyle-related content -- such as ways to include more whole wheat in your diet, the pros and cons of birth control pills, and offering makeup tips. "In September, we updated our healthy living site with additional content and a new look," WebMD Chief Executive Cavan Redmond, who took over in June, told Reuters. We are providing more editorial content that matches individuals who are looking to stay healthy and looking for health tips. The company has made similar changes to its Facebook page and has issued apps for mobile devices that help users track their weight, fitness and overall health Redmond, a former Pfizer executive, said WebMD has launched two applications designed to get users to come back regularly. "Baby App" keeps track of a baby's growth, sleep and feeding patterns and how often a diaper change is needed. It also stores photos and videos than can be shared via social networking sites. "Pain Coach" logs pain levels and triggers, and provides pain management tips approved by WebMD doctors. One of WebMD's biggest strengths -- its reputation for reliable information -- is also one of its biggest challenges, however, as it is expensive to produce. Producing cheaper content is not an option as the company is also competing with non-profit websites such as those run by the Mayo Clinic and Harvard Medical School as well as MedlinePlus, a site run by the National Institutes of Health. "WebMD is competing for quality with websites who have different business models," said Kurt Kessler of sales and marketing consulting firm ZS Associates. The Harvard or the Mayo Clinic do not rely on advertising dollars as it is not their core business. One way to derive more revenue from content would be to syndicate WebMd's information to other websites, although this runs the risk of diluting its brand. Another option would be to expand e-commerce tie-ups with retailers. "Maybe if they partner with Walgreen, like (they did with) Boots in the United Kingdom ... that's the only type of e-commerce that would work," Stifel's Rubis said. In its collaboration with Alliance Boots, WebMD provides healthcare information to customers of pharmacy chain Boots. Alliance Boots is 45 percent owned by Walgreen Co. Editing by Rodney Joyce and Ted Kerr