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TMF Interview With
adam.com Inc. Chairman and CEO Robert Cramer

With Brian Graney (TMF Panic)
October 26, 1999

Based in Atlanta, adam.com Inc. (Nasdaq: ADAM) is an online provider of consumer health, medical, and wellness information. The company, founded 10 years ago as ADAM Software, originally provided CD-ROM products for the medical education market. This year, the adam.com name was adopted to coincide with the launch of the firm's namesake website, which has become the cornerstone of the business. We talked with adam.com Chairman and CEO Robert Cramer about what differentiates the company from other online health information providers and how the Internet is impacting the delivery of healthcare in this country and around the world.

TMF: You revealed the new adam.com website in May. I was wondering how well the rollout has gone and how well it's been received by the public.

Cramer: I think the rollout of adam.com has been very well received and I think our business model has been well received, too. We think it's the most innovative and unique business model in the consumer online health space. We really are building sort of the "un-portal" where we're sort of the info space of the e-health market in that we are providing our content, our tools, and our community to an increasing number of health sites all across the Internet. By having this distributed model we think we are reaching more health-med retrievers than any other company out there.

TMF: Has managing the growth been difficult, and if so what new challenges have you faced since launching the site?

"We are kind of the "un-portal" and we have a business model that is a play on the growth of the entire e-health space."
Cramer: Rolling out our business model has been exciting, and one of our big challenges is to really educate the market about why adam.com is different from many of the other e-health players in this space. We are kind of the "un-portal" and we have a business model that is a play on the growth of the entire e-health space. It's not a bid on any one particular site. We [are building] a diversified, recurring revenue stream model where we are able to leverage our proprietary health information and sell it time and time again to different customers. It's really an infrastructure business-to-business model that is not dependent just on advertising or sponsorship revenues.

TMF: So is the growth of the company directly tied to the overall growth of the Internet? Or are there other factors that come into play?

Cramer: We think the majority of our growth will certainly come online as the Internet grows and the demand for health information continues to grow in this country and in particular all around the world. By owning this one-of-a-kind collection of proprietary health information, we think adam.com is in a wonderful position to ride this growth and to do it in a way that we're not having to spend millions and millions of dollars on distribution to attract eyeballs like many of our peers in the industry. By being an infrastructure play and creating the leverage that we create by providing hundreds of sites with their content, we really think our reach is tremendous and our costs are maintained.

TMF: Do you see more competitors entering into this space or have we reached a saturation point in terms of online healthcare sites?

Cramer: In the online health area, there are a number of players and it does continue to grow. But the important thing about the e-health market is that we believe that people get their health information from a lot of different places, they don't necessarily get it from just one place. Therefore, there is tremendous opportunity for a company like adam.com to provide its content, tools, and community all across the Internet. So there may be more players in this space, and we think that is good because those folks can be customers of ours.

TMF: You talked about some of the content, the reams of data that your website provides. How much of a competitive threat are large public sector websites, such as MedLine?

Cramer: MedLine is a government-sponsored information tool. It does a job, but we think the information that adam.com provides is the best way for consumers to get fast, accurate answers to their health information questions. Everything we do is sort of designed to make that happen. We have a 1,500-topic medical encyclopedia that is featured on Yahoo!, on Excite, on Health Answers and Health Central and Healtheon. It's featured on Merck-Medco and PCS and a variety of Cox local city sites. It's the most granular in detail of its kind. We think covering that broad spectrum of 1,500 topics and having 87,000 hyperlinks between is a huge asset that is very difficult for other people to create.

Health information takes a real passion to keep it accurate and updated. At adam.com, we've built an infrastructure to do that. So we think we can provide this service to many of our website customers who can take advantage of that and then focus their time and attention on distribution and other things. We are kind of this turnkey, outsourced solution for their primary core consumer health information.

TMF: What are some of the facts and figures for investors to keep in mind as they track how the company is evolving?

Cramer: We're seeing certainly our Internet revenues grow significantly, and we are fortunate that we have other revenue streams in that our content can be distributed in the broadcast market, it can be distributed via CD-ROM, [and] it can be in print. But we're seeing and expect to see our [online] revenues really begin to ramp up. And we're also seeing that our expenses are not growing anywhere close to many of our public comparables. So we're able to do this in a much more cost-effective way.

"Health information takes a real passion to keep it accurate and updated. At adam.com, we've built an infrastructure to do that."
We think the reach in our business model is a very compelling one and it's clearly differentiated [from] many of the other players in this space. I think investors are now beginning to take a little more of a critical eye in the online health market and adam.com really ought to be a company that they focus on. We bring over 10 years worth of developed content, we have a track record of producing the very finest health information. We've been doing it for over a decade. Millions of people have used adam.com content in the past and we think that will continue to grow in the future.

TMF: Can you talk a little bit about the decision to de-emphasize your traditional business, the CD-ROM business that you mentioned earlier? What really led up to that decision and how did it change investors' perceptions of the company?

Cramer: I think it's beginning to change investors' perceptions and we'd like to see that really continue. We had to use CD-ROM as a distribution methodology because we had such a rich media product and that was the only way to efficiently distribute that. Fortunately, the Internet has come along. And while today everything is still very text-based, adam.com really is the company for the broadband market in the online health market. So, as broadband comes, we think we are in an incredibly strong competitive position.

With the power of the Internet, we were able to reach so many people under one development methodology that we felt that we needed to turn the whole company and take advantage of this new efficient distribution medium. We've done that, [and] we think we've done that well. We think the power of what we have, our visual content and our clinical content, will really put adam.com in a position to be the broadband powerhouse in the consumer health marketplace.

TMF: How do you see the Internet changing the way that healthcare is provided in this country, say, five years down the road?

Cramer: I think it will be radically different [in terms of] what people will get online in five years compared to what they get today. I think it's fairly basic today and mostly it's text information. If you do a search, you get a ton of information. We're trying to really work on making this much more efficient. We're trying to make the experience much more engaging, more interactive, get more data inputted from our users so we can provide them with more refined, personalized information.

"We think the power of what we have, our visual content and our clinical content, will really put adam.com in a position to be the broadband powerhouse in the consumer health marketplace."
I think in five years it will be very, very different. I think people will be e-mailing their doctors and there'll be just a whole host of services available that aren't available today. That will initially have a dramatic impact on the delivery of healthcare not only in this country, but also around the world.

TMF: What do you think are the major short-term challenges facing the company right now?

Cramer: I think one of our biggest challenges is for people to understand why adam.com is different than many of the other players in this space. A lot of companies have reported their September numbers and their losses are just tremendous. We have not reported ours yet, but historically our losses are a fraction of what many of our peers are. Our revenues are equivalent or higher than many of them and we have a market cap that is a fraction of our peers. We think that's a little bit out of whack because adam.com owns more proprietary health information than anybody else.

I think we have a business model that will really stand the test of time. So I think our challenge is to get the investment community, with the small market cap that we have, to take a look at adam.com and really get an understanding of what this company is all about.

TMF: Well, I really appreciate your taking the time to explain and talk about your company with us today.

Cramer: Thank you very much, Brian. I appreciate it.

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