FDA’s Culture Is Genetically Dominant Over 23andMe’s Business Model

12/5/13Follow @wilbanks

I’ve been following the 23andMe saga with dread and fascination and frustration since it hit in late November. If you’re not up to date, David Dobbs has the canonical collection of stories to get you there.

This is a post about business models and culture clashes. It’s long. I should also start by disclosing that my former nonprofit project received funding from Anne Wojcicki’s philanthropic foundation, that I hold some shares in small startups that could benefit from the success of direct to consumer genomics (though not in 23andMe) and that I now work at a nonprofit that is premised on the idea that personal access to data will fundamentally change research. My 23andMe data is online for all to download.

So I could personally benefit if 23andMe survives and thrives, and I personally admire Anne and her work, even when I criticize some of the choices she makes. It’s hard as hell to be a CEO and she deserves credit for icebreaking, vision, and perseverance.

That said, I am deeply frustrated by the simplistic narrative of OMG FDA BIG GUBBERMINT SILENCING DARING ENTREPRENEUR. It’s not that simple.

23andMe has been trying to bring a technology business model, and a bayesian data culture, to the genetics world for six years. Both of those were gambles. And I think the problem they’re in right now is a direct consequence of those gambles not paying off yet.

First, by a technology business model, I mean the idea that you go get all the users you can get by giving your service away for free and figure out a way to make money later. This is no different than social networks business models. Facebook, Twitter, Instagram, Snapchat—all started with this concept of acquiring the most users and then working out a model for revenue. And all converged on advertising, because for all the promises of the new network, selling people sweaters worked better than anything else.

As a business model for genetics though, it’s different, because your cost isn’t just distributing an app and paying Amazon cloud fees. 23andMe has been selling their direct-to-consumer genotyping kits for six years now, always at a deep discount to their actual price. They exacerbated that financial model when they dropped the monthly subscription requirement last year. If they can’t find a way to make money soon, they’re going to wind up in the pets.com boxyou can’t sell a dollar for 50 cents and expect to make money on volume.

I would guess that the hope was that population genetics would yield a business model that wasn’t regulated. If you could get enough people in the door, then your internal analysis could inform efforts at pharma, at insurance companies, and more – without ever having to market your spit kits as medical devices in the regular business model. Their push to hit a million users indicate this remains a goal.

But since they’re not doing that yet, it seems they’re not at the magic number. That means going the traditional route, which is … Next Page »

John Wilbanks is a data commons expert and advocate who has spent his career working to advance open content, open data, and open innovation systems. He is a senior fellow at FasterCures and chief commons officer at Sage Bionetworks. Follow @wilbanks

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