RevaHealth.com Blog

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My experience with monetizing  web software can be broken down into three very different professional experiences.

The first one was with Baltimore Technologies, where I promoted the product UniCERT. Despite Baltimroe Technologies’ unfortunate demise, the product was profitable and at peak we had revenues of about €150M.

The second was with NewBay Software. While I was VP of Product at NewBay Software, we took a very different approach. For the most part, we looked to white-labelling our web application into customers with large, existing subscriber bases.

Thirdly: I am currently CEO of RevaHealth.com. We are a search engine/comparison shopping site for consumer health products such as high end dentistry, laser eye-surgery, cosmetic surgery, fertility etc. We monetize this application through a combination of subscription and advertising, and when it comes to advertising we use the entire gamut of advertising models out there.

I am not going to talk about other forms of monetization such as transactional models, micro-payment, virtual currencies and one off pay-to-use fees. The reason I’m not going to talk about these is that I don’t have any direct experience with them. I’m going to try and limit what I talk about to only what I have direct experience with.!

Early stage companies put a lot of focus into getting the deal done and not enough focus into long term profitability. What happens here is that maintenance, support and recurring license fee are neglected totally. Having been in this position multiple times, I recognise it as almost inevitable, however it is possible to temper your eager sales guys going out to get the deal done.

Commission models normally highly incentivise large upfront payments and so the sales guy front-loads the contract as much as possible (after all that is what you are paying the guy to do). What happens then is that your customer becomes a liability. This is not good – customers should be one of your biggest assets. Think about how this would look to a potential investor in your business. A really good way of combating this is to have a contract negotiator who operates as a separate function of sales and who is not commissioned on the sale, but on the long term profitability of the contract.

NewBay Software is a good example of effective white-labelling. They run their web applications under the brand of various tier-one network operators around the world – using a variety of business models. Each model is right for the individual customer; however they all share one characteristic – sustainable revenue.

The simplest of these models is the per user per month fee. This gives the customer confidence that they are only paying for value (if a consumer stops using it they stop paying) and gives the white labeller a very predictable revenue stream. Revenue tends to build month on month.

Subscription revenue from consumers is sometimes viewed as the nirvana of web application revenue.

In general I’m a big supporter of the subscription model and it forms the backbone of RevaHealth.com’s revenue. If you can get users to pay a monthly subscription it is a sure sign that you have created a product of value. If you haven’t, then they won’t pay for it.

It shares a great deal in common with the white label model of charging per user per month due to predicable, increasing revenue.

However there is a dark side to the subscription model that isn’t much talked about. This is the graph that is commonly used to demonstrate the power of the subscription revenue model. The logic behind it goes like: if you can sign up 10 customers a month and each user pays every month, rather than
upfront, it leads to ever increasing revenue, or at the very worst, static revenue. Growth in revenue is not dependant on an ever increasing sales department.

The problem with the graph is that it is rubbish. It is a theoretical model that cannot be achieved in the real world. The reason for this is that people die. No matter how perfect you server is, people die and will stop using and therefore paying for your service. In reality the list of reasons people will
stop paying for your service is long, with dying being the least likely.

So lets have a look at the affect on the model. Firstly an aspirational 1%. At 1% we can just start seeing the curve in the graph– but hey, no big deal, you’re still going to rich.
At 5%, the curve starts to become more pronounced, and those with a mathematical bent will start noticing the self-limiting nature of the function.

At 15% the curve starts becoming self-limited at about 20 months and growth is minimal from about the 8th month. If you want growth to continue, you are going to have to start signing up more users on a monthly basis. The reason for this is that the number of subscribers that you can sign up in a month is a
function of some internal resource of your company (raw traffic, sales, engineering). Whereas the number of customers that you lose every month is a function of the number of customers that you signed up in the past (and the churn rate). And no matter how hard your sales team work, they can’t change the
number of customers that they sold to last year.

Advertising is the crack cocaine of web application revenue. You never have to sell. Just plonk a bit of code on your website and money arrives in your bank account every week. However, the problem with crack is that once you’ve taken it you want more.

And before you know it you have pimped out every pixel of your site and your application has become like a clapped out hooker that no one wants anymore.

On a serious note advertising works best when your user is transient and close to the point of purchasing a product or service. If your user base is very much the same from one day to the next then they won’t see the adverts anymore. In the case of RevaHealth.com, 80% of our users every month are unique and most
are looking to purchase a healthcare product with a typical value of about €3,000. This makes advertising a particularly suitable revenue model for RevaHealth.com.

You have to be careful with advertising. Sometimes you can undercut your own business model.  This is the old UI for our site RevaHealth.com. On the left hand side of the screen you can see our search results – this is our main method for monetizing our site. On the right hand side we have Google
Adsense, this provides a minor but still significant revenue stream.
Now, if you look at the results on the left you will see a clinic in our search results.

On the right hand side, with Google Adsense, you will see the same clinic advertising. This is bad for two reasons.Firstly, one of these entries has to be under-cutting the other and secondly, it provides the user with a bad experience. This is totally avoidable but does require a management overhead to
get right.

Per Impression advertising is the old man of online advertising. In general it offers you the lowest revenue for the lowest risk. You get paid for each impression, regardless of the user’s interaction with the banner.
RevaHealth.com earns about $5 for PPM advertising, which is pretty good. I have seen sites that have a PPM of $0.2, so if you plan on making money through PPM advertising you are going to need a lot of impressions.

Pay per Click advertising is now the most common form of advertising on the web, thanks in part to Google’s Adsense network.  In general I think this is an extremely good way of monetizing a web application and Google make it pretty easy.  We earn about $0.8 to $0.9 per click on average, with click-through of about 3-4%. These are very high click-through rates and reflect where in the sales process our users are. This results a $22 PPM equivalent. Please note that these PPC figures are not Google Adsense but from advertising that we sell directly.

A not on Google Adsense I would encourage you to start experimenting with colours, position and borders. We made some seemingly small changes to our Adsense, incorporating them better into the page content, resulting in a doubling of revenues.

Affiliate marketing or Pay Per Action advertising are largely the same thing.

In general, they tend to offer the greatest levels of revenue of all advertising models, however they also carry the highest levels of risk. With PPA advertising you don’t get paid for showing the advert and you don’t get paid if the user clicks on the advert. You only get paid if the user completes a purchase with the target company. At RevaHealth.com we have done a few affiliate deals and the resulting levels of revenue are truly eye watering.
We can earn the equivalent of €400 PPM on an affiliate model, which seems
to make PPA or affiliate marketing a no brainer.

But despite the massive payout we don’t do affiliate marketing anymore. The reasons why not are collections and cash flow. Unless you are in a field where there are established affiliate networks, such as the online gambling industry, trying to get paid is a big issue. In the case of RevaHealth.com, trying to collect money from 10,000s clinics worldwide would require a collections department larger than the rest of the company combined.

Cash flow would also be a major issue, as a customer typically gets in touch with a clinic 3-4 months before they intend on having the treatment and it can be a further 3 months until the clinic gets paid. This would give RevaHealth.com an unacceptable cash flow situation.

So we try and balance our revenue stream by using a combination of subscription revenue (which provide predictability) and Pay Per Lead advertising.  This gives us better monetization than PPC and good cash flow, as revenues are paid in advance.

Josef Woodman, author of medical tourism bible Patients Beyond Borders, the go-to guidebook for anyone considering travelling for medical care, is now producing guides to individual countries, starting with Malaysia. Patients Beyond Borders: Malaysia Edition provides all the information anyone could ever need about clincs,healthcare travel agents, patient and guest accommodation as well as general travel information about Malaysia.

Its highly efficient staff and quality facilities mean that Malaysia welcomed 296,687 medical tourists in 2006, with that figure increasing by 15% year on year. And the great savings available make the long journey worth it, with a ummy tuck procedure, costing on average GB£4,129 in the UK, available for as little as GB£2,230.

On RevaHealth.com, you can search for cosmetic surgeons in Malaysia and dentists in Malaysia.

Patients Beyond Borders: Malaysia Edition, will be available from July at all good bookstores and online.

Some interesting news via the BBC; out of 1,430 heart operations carried out on people from Northern Ireland, 440 had to be performed in England or the Republic of Ireland. The operations cost £14,000 in England and £17,000 in the Republic of Ireland.

The figures are being publicised by the charity NI Chest, Heart and Stroke with the aim of getting all patients treated locally in Belfast. They say that the quality of some of the treatment outside of Northern Ireland "fell short of the high quality standards which are commonplace at the Royal Victoria Hospital".

I was interested to hear more about about this disparity in quality between operations carried out in Belfast and those carried out in London and Dublin, but there were no supporting figures provided, only a mention that "in some cases additional surgery has been needed once the patient returned to Northern Ireland".

I think it would be safe to assume that some patients who are treated in Northern Ireland also need additional surgery after their initial treatment, so it would be interesting to see the actual figures and compare like with like.

This morning the Daily Mail reports that almost 50% of the British population are putting off going to the dentist. Instead of being afraid of painful needles, they are instead concerned about the costs incurred, even with NHS dentists. Also, in some parts of Britain, one in three people are finding it difficult to even locate an NHS dentist in their area, with their only other options being shelling out even more to go private or foregoing much needed treatment.

As one of the few countries in the world to provide comprehensive “free” healthcare to its citizens, it is a shame to see the NHS failing so many people.

There has been a lot of talk about Skype for the iPhone, which got released to the world today. Some people have been saying it is a game changer that threatens the network operator’s very business model. Others have been saying that the operators will block it to avoid all you can eat 3G plans canabalising voice revenue.

It won’t because Skype for the iPhone will be hamstrung by restricting voice communication over WiFi and not 3G giving it less functionality that Fring or Truefone that have been available for months. Both of these applications allow voice over IP communication on the iPhone and are interoperable with a host of messaging clients such as MSN, AIM, Skype, etc. So does Skype bring anything to the party? Well, yes – it brings a great brand, market presence and unsurpassed usability.  These factors should combine to provide a massive boost to non-cellular voice communication on the iPhone.

On the issue of the operators blocking the application, although this is technically possible it really isn’t up to the operator at all. It is up to Apple. Apple has such a stranglehold on the market that they can impose pretty much whatever terms they like on operators. So if Skype convinces Apple that letting users use skype over 3G is a good thing then Apple stand a decent change of forcing the operators to follow suit.

The fun police have been patrolling overtime lately, telling us that the average (bored) office worker is wasting two hours and twenty minutes per day online, sending emails and hanging out on Facebook and Twitter. This apparently wastes tens of millions of Euros for employers every year. We all know people who work in those lame offices where they are constantly blocked from visiting any interesting or fun sites. And I’ve heard some sordid whispers about workers who have NO internet access at all!

Having lived the last few years of my life completely oblivious to Twitter, I was introduced to the wonders of the social networking tool when I started working here at RevaHealth (BTW, you can follow me here, Phil here and Caelen here). While I was rather underwhelmed with it to begin with, I soon realised how addictive Twitter can become. The only problem is, when you’re using Twitter as at work, you run the risk of being fired by those inconvenient boss type people. Here are my top 5
tips for making the most of your time on Twitter, and letting your boss think that what you are doing constitutes work.

1. If the place you work for has a website, list the URL on your profile and upload the company logo as your background. Then you can convince your boss that more and more people will visit the site and learn all about your fascinating company.
2. Embrace the 140 character limit. It is pretty useful as it help you focus in on exactly what it is that you want to say. Twitter forces you to reduce longwinded paragraphs into short, succinct
   sentences. You can then tell your boss that Twitter is making you into a better writer.
3. Twitter helps you make new friends. You can use stuff like search.twitter.com and Nearbytweets.com to find out what people are tweeting about. I especially like Twitter search. It’s very easy to use, which is great for someone like me who is rather limited technically! If you have a topic you want to hear people’s views on, just bash it in and scroll down through the search results. Nearbytweets.com lets you see what people in your area are tweeting about. Once you’ve built up a lovely big coterie of followers you can tell your boss that you are using Twitter to improve your interpersonal and communication skills!
4. Get used to using all the various apps associated with Twitter, like Tweetdeck, Tweetstats,Twitterfeed, Twitterrific, and the rest. Then you can show your boss how proficient you are at using them and how they are improving your IT skills. Don’t over-do it though, or
   you’ll find yourself suddenly the IT expert of the office- fixing theprinter and replacing the paper in the fax machine.
5. Use Twitter like Google. If your boss has a question, try asking your fellow Tweeters, rather than heading straight over to the “Big G”. Think about it, Tweeters love to talk about themselves, so mining their experiences and knowledge could prove really
   useful. This means that you’ll be able to provide your boss with a very detailed answer to his question lickity-split and be his personal hero for a least a few more hours.

And remember, if all else fails, and your boss sees through the whole thing, you can use Twitter to find a new job! Just don't copy this dude.

After BizCamp Dublin, I blogged about my tips for seeking angel funding by building up trust. Then at BizCamp Limerick, I was struck by the number of entrepreneurs who were planning to set up small businesses, but simply couldn’t find the capital to get things moving. The same questions kept coming up, “How can I get angel investments?” “What government agencies will provide me with grant assistance or seed capital?”

The majority of people aren’t looking for large scale investment; they need €20K, €50K or €100K. They also aren’t looking to reinvent the wheel. They’re hoping to build businesses that would provide real value to their customers and a reasonable standard of living for them and their families.

The problem is that, while government agencies can provide some funding if you fall into a specific business category, they don’t have any more money now than they did last year. They can’t hope to fund the glut of new businesses. The same goes for the few angels in the country. There aren’t any more of them than last year, in fact there are probably significantly fewer, as a large percentage of their wealth would have been hit by either the property or the stock market crash. A lot of aspiring Irish entrepreneurs need to look at new avenues for raising capital.

So where can people turn for funding?

This may sounds drastic to some, but I think the answer lies in people’s pensions. Allowing entrepreneurs access to their pensions now would require a change in the rules, but that is something the government can, and may well need, to do. In the United States, this is nothing new, people can “invest in themselves”, using their 401K funds to build up their business, without incurring any nasty financial penalties.

This isn’t a solution for everyone, but a lot of Irish people have a reasonable sum of money, that they can’t get their hands on, locked up in their pensions. Typically, this money has been invested on their behalf by a fund manager in a combination of stocks and bonds – mostly overseas. I think that it makes sense, in the current economic environment, to bring this money back home and get it invested in indigenous businesses that can provide real growth for the country.

For those who think this is a drastic solution, let’s bear in mind that we are in drastic times and investing your pension into your business is a normal thing for entrepreneurs to do. It’s what I did and that was during the boom years. I deliberately didn’t pay into my pension for 7 years, saving the money in order to have the capital to set up RevaHealth.com.

Of course this isn’t without risk – for those who fail it means the loss of a lot of money, intended to provide for their future. However, for others, it offers up the possibility of building a future for yourself that is within your control, not that of a pension manager.

As well as taking part in a panel discussion at BizCamp Limerick on Saturday- see pic below- Caelen also gave a talk about one of his favourite topics- How to be Wrong Everyday and Still be Right. Check out the full talk and slides:

Pictured with Caelen are: (from l-r) Evert Bopp of Greenhouse Business Incubator, Ted Vickey of FitWell LLC, James Kennedy of Piehole.ie and Pat Phelan of Cubic Telecom.

Caelen and Owen headed down to BizCamp Limerick at the weekend, and as promised, it was a very productive Saturday. Owen has put together a review of Anton Mannering’s (CEO of social network platform Udoogoo) talk:

There was a great buzz at Bizcamp Limerick this weekend which took place in Kemmy Business School in University of Limerick.  One of my favourite speakers at the event was  Anton Mannering, who runs the All Island Digital Media Network and is CEO of Udoogoo.  He gave a talk on networking and emphasized the importance of giving first when you met new people.

I thought Anton verbalized what networking is at its best- meeting new people, helping them when you can and asking for help.  Anton gave us practical advice on how to think about networking, emphasizing the importance of reciprocity, in other words, find ways to return the favours that other people do for you. He showed us that networking in this way helps you grow your business and develop new opportunities.

I came away from the talk inspired, ready to shake hands, meet people and help whoever I could.

Watch this space for more reviews and pics from BizCamp, and a video exclusive of Caelen’s talk!

(Oh, also, BizCamp Belfast has been pencilled in for Saturday 16th May, and Caelen will be there. You can follow BizCamp Belfast on Twitter).