After Cutting Deals With Most of the Big Drug Cos, Sermo CEO Offers Health 2.0 Survival Tip: You Will Not Pay Your Bills with “Ads by Google”

8/28/08

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to recruit physicians to work on their clinical trials. To shepherd this and other programs, Sermo has recently recruited Pam Randhawa, the former vice president of marketing at Waltham, MA, clinical trials software firm Phase Forward (NASDAQ:PFWD), to be its VP of strategic development. (Rebecca detailed some of Sermo’s earlier offerings for pharma here and its product for Wall Street clients here.)

The U.S. pharmaceutical industry is expected to nearly double its spending on Internet advertising from an estimated $1.19 billion this year to a projected $2.2 billion in 2011, according to market research firm eMarketer, but the jury is still out on whether most of the young Health 2.0 startups chasing these dollars will be successful in this pursuit. Eventually I’d like to survey members of the Boston-area Health 2.0 cluster to find out which ones are attracting business from drug firms. The sense I get from Edward Cahill, a partner at HLM Venture Partners in Boston and a veteran healthcare IT investor, was that Sermo is somewhat unique in its success bagging pharma clients.

Cahill, who is not an investor in Sermo, watches the online marketing habits of the drug industry closely as a lead backer and director of Phreesia, a NY-based startup that provides doctors’ offices with touch-screen pads intended to replace the clipboards and paper forms doled out to patients at reception desks. Phreesia, which doesn’t charge physicians for its digital pads, makes money on healthcare ads and surveys that appear on the pads’ screens as patients fill in their information. The startup has landed 10 contracts from pharma outfits since the pilot launch of its PhreesiaPads last year, Cahill says. What’s the secret to Phreesia’s and Sermo’s successes with pharma? “What both companies offer are communications channels that are unique and are either patient- or doctor-specific,” Cahill says. “They allow not only a commercial messaging but a true interactive dialogue that is educational on both sides.”

Sermo’s Palestrant says that several Health 2.0 companies have approached him seeking to be bought out due to their lack of business traction. His advice to other startups in the field is to be able to deliver potential clients a clear value proposition, and he does not recommend that they rely on revenue from traditional online ads.

“You will not pay your bills with ‘Ads by Google,’” Palestrant says.

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