WebMD sees rapid online and mobile growth in pharma ads, with more to come

Pharma is still playing catch up to consumer marketers in the shift of advertising dollars away from traditional media like TV to digital media like online and mobile advertising. But it is making progress.

WebMD CEO David Schlanger

"Not too many years ago, everyone talked about digital representing about 5% of most pharmaceutical brand's budgets. There are a bunch of industry estimates out there now that it's between 10% and 15%," said WebMD CEO David Schlanger at a recent Leerink global healthcare conference. "It certainly under-indexes based on where eyeballs are. And we're continuing to see a shift."

Leerink, an investment bank specializing in healthcare, noted afterward that his commentary "reaffirmed our thesis of pharma ad dollars steadily shifting from offline to online and mobile, with WebMD ($WBMD) and Medscape sites/apps as top beneficiaries of this secular trend." The report added WebMD remains one of its top picks and reiterated its "outperform" rating for the stock. WebMD reported quarterly earnings Tuesday.

Mobile ad revenue in particular has grown quickly for WebMD and its other online properties, which include Medscape. "Mobile's been a strong traffic driver for us for the past several years and we expect that to continue," Schlanger said, via audiotape of the session. "In 2014, we reported that 34% of our advertising revenue was delivered on mobile platforms. … We've been really effective at leveraging our mobile traffic."

More than 75 million consumers visit WebMD's websites and apps in the U.S. monthly, he said, while it also has 650,000 active U.S. physicians and 1.5 million globally on Medscape. Schlanger noted that 70% of the company's overall advertising comes from the biopharma industry.

During the chat, Leerink digital health analyst Steven Wardell also asked Schlanger about pricing pressures and whether that could affect ad budgets. Schlanger said with pharma's current focus on more rare and niche specialty treatments with smaller patient populations, digital is an important marketing vehicle.

"We haven't seen any correlation between drug pricing and proclivity to advertise up until now," he said. "Beyond political pricing on drugs, there is market pricing pressure on drugs [with] large PBMs like Express Scripts and CVS negotiating for drug discounts. And again we have not seen impact of any of those activities or formulary placement on proclivity to market."

Along with mobile, social will be important to the health information web portfolio this year, Schlanger said.

"We were very early in adopting mobile and making sure that WebMD and Medscape content and service was available on mobile platforms," he said. "We started in 2015 investing in the infrastructure so that our organization isn't just expert at publishing content optimized for search, but also expert at publishing content that can create virality on social platforms. As 2016 unfolds, you should expect to see more WebMD content on social platforms."

He noted that video is a great example of a highly sharable social content and that WebMD is now focused on creating more video content.

- listen to the Leerink audio on WebMD's site

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