Peter
Frishauf is no stranger to medicine and disease: His family tree is filled with
doctors, and he himself was a pre-med undergrad and successful medical trade
journalist. Find out how he's leveraged his background to build Medscape, one
of the most successful medical information sites on the Web.
Peter Frishauf is no stranger to medicine and disease. His
mother is a physician. He has countless aunts, uncles and cousins who are
doctors as well. It's a lineage that has led him to a fascination with the
medical field — first as a pre-med undergraduate, and then as a successful
medical trade journalist. But it is his entrepreneurial spirit and knack for
business management that has made him one of the medical industry's fastest
rising
personalities.
Frishauf is the founder of Medscape
Inc., a New York-based online service that has quickly become the leader in
the highly competitive, 15,000-site, online medical information industry.
Launched in June 1995, Medscape provides doctors, healthcare professionals and
consumers with free medical articles and databases that provide updated
information and research on nearly every disease and treatment imaginable. The
topics discussed range from AIDS to women's health to psychiatry to obscure
specialties.
In its first three years of existence, Medscape
accumulated more than
625,000 members and is poised to grow even faster in the
coming years. According to Frishauf, a new doctor joins the site every six
minutes and 1,000 new members join daily. To date, 75 percent of those members
are healthcare professionals, while the remainder fall into the consumer market
category. The site has already become popular enough to create a loud buzz on
Wall Street — even though Medscape is still privately held — and for Fortune
Magazine to name it as one of its "cool" companies for 1998,
predicting the company will become the "niche's probable future
Yahoo."
Medscape didn't burst onto the Internet scene in a blaze of
glory, as some sites do. In fact, it began as a side project for SCP
Communications, a medical education and communications company that Frishauf
started in 1982 at the young age of 26, after leaving his writer position to
pursue his own interests. SCP publishes medical journals, conducts educational
and promotional symposia and manages clinical trials and drug studies for the
pharmaceutical industry. Frishauf, who was then president of that company,
wanted to see what avenues the emerging commercial Internet could open for his
business, so he put together what he calls a "skunk work team"
consisting of five SCP officials, to put together an experimental Web site.
"We didn't know, in 1995, whether or not doctors would
like this," Frishauf admits. "It became quickly evident that it was
very popular among a small but rapidly growing group of physicians."
The original Medscape was designed to expand SCP's core
products and to identify the site's users, an aspect Frishauf deemed important
in order to identify a target audience for future brand marketing. He also
wanted the site to be easy to navigate and immediately useful to the user.
"The concept was ... fast, inexpensive access to information," he
says. "[On the Internet] there's so much information, and so much of it is
poor quality, it's easy to drown in data and starve for wisdom. We were going
to create a site that was organized by specialty area."
The concept proved to be just what the doctor ordered. Soon,
the numbers of members began to grow and entice additional advertisers, and
Frishauf realized that he had found a great opportunity on the Web. Medscape
was run as a division of SCP for only one year before it was spun off as an
independent company, with Frishauf acting as CEO. He has since left the
day-to-day operation of SCP, but still serves as that company's chairman.
Frishauf speaks a lot of his value proposition. One of the
reasons he chose to continue requiring members to register at the site, despite
industry estimates that predict a site can be made to handle double or triple
its current traffic by removing such registrations, is that he believes he
needs to be able to tell his advertisers who they will be reaching. Being an
editorial content-driven site, which is free to everyone, Medscape relies on
advertisers to produce revenue. Although physicians are a small target
audience, advertising dollars from pharmaceutical and medical-equipment
suppliers are seemingly endless. An estimated $8.5 billion will be spent on
health care advertising this year alone.
Frishauf set out to increase the value of Medscape's content
by forging publishing partnerships that provide material for the site. He created
a publisher's circle, which consists of all of the SCP publications as well as
notable journals such as American Heart
Journal, Clinical Psychiatry News,
and the Journal of the American Board of
Family Practice. The partnerships not only contribute to Medscape's
editorial content, but also provide promotions and advertising for Medscape to
reach those publications' readers.
In November 1997, Frishauf expanded Medscape though the help
of outside financial backers. The list of backers quickly became extensive and
impressive, featuring some of the more notable players on Wall Street. Helping
finance Medscape's future growth was Media Technology Ventures, whose investors
include Motorola Inc., Sun Microsystems Inc., Hallmark, Fujitsu Inc.,
C3/Comcast, Hearst New Media, Mattel, GE, NBC and Telcom Italia. Also acting on
the strong buzz created by the growing Medscape's success were New York's
Patricof & Co., the Japanese fund CKS Venture Capital, CIBC Oppenheimer
& Co, and the French partnership, Wormser Freres. But most impressive, was
the active participation of several individual investors, led by Esther Dyson,
who tend to be more discerning with their investments. Dyson, who has a
reputation in financial circles as a shrewd investor with a hard nose for making
money, now sits on the board of directors at Medscape.
"We did seek her out," says Frishauf of Dyson.
"She is extremely discerning and does not get involved with companies
lightly at all."
According to Frishauf, Dyson has become a vital link in
Medscape's future, particularly because of her commitment to helping the
company grow. "She's very involved in Eastern Europe and the former Soviet
Union countries," Frishauf says. "One of her goals was to help
Medscape grow internationally, and she's done that with a lot of
introductions."
Frishauf says that Medscape now has "hundreds of
thousands international
physicians" included in its membership.
In February 1998, Frishauf used part of the cash infusion —
approximately $7 million — to hire a new seasoned CEO for Medscape that would
bring a fresh perspective and management skills to Medscape. He and his board
found and hired Paul Sheils, former vice president of Dow Jones Interactive
Publishing. Sheils' credentials include overseeing the development of the Wall
Street Journal Interactive, Dow Jones Interactive, DowVision, and Dow Jones'
business news and radio networks.
Sheils couldn't pass up the Medscape offer: The young
company's numbers were strong, and its integrity and dedication to content reminded
him of the Wall Street Journal. He saw the opportunity to grow Medscape into
the medical equivalent of his old employer because medical professionals, like
financial professionals, have a basic need for information. Sheils believed in
the venture so strongly, in fact, that he wasn't even put off by the prospect
of leaving the cushioned seats of Wall Street for Medscape's loft on
Manhattan's 29th Street.
Of Sheils' contributions to Medscape, Frishauf says,
"He brings a different level of expertise to the [Internet] business than
I had. He's just terrific."
After handing over the title of CEO, Frishauf has
transitioned into the role of product development specialist and sits as
chairman of the board. Frishauf also hired an entire management team to serve
under Sheils, and he says proudly that six months into the new organizational
structure, no one has shown signs of discontent, and no one has left.
Medscape doesn't need fixing, but Sheils and Frishauf are
still preparing the site for a brighter future. Recently, the company secured
another $4 million in funding, much of it from the original backer, Media
Technology Ventures. The money has been earmarked for branding Medscape around
the world to place the company firmly at the head of a market that is expected
to grow dramatically over the next few years. Primarily, Medscape will take on
the Internet's other major medical information provider, Physicians Online. Although the competition is
fierce, it is not direct: Physicians Online is currently available to only U.S.
physicians (MDs and DOs), physicians-in-training and medical students through a
private network, and its services include Web access and other non-medical
resources.
Already, Sheils has instituted Medscape Remote, an affiliate
program that links consumer health care sites to Medscape. The program also
allows consumer sites the capability to offer software plug-in downloads that
establish an interface with Medscape research. They also plan to take advantage
of other consumer media outlets such as television and radio. While the
strategy is not designed specifically to attract consumers, the end result is
expected to increase brand awareness that will ultimately drive more health
care professionals to the site. Medscape is also working with hospitals and
other facilities to develop a point-of-care knowledge base.
Frishauf says that another reason Medscape will continue to
grow is because it is qualitatively better than most sites. In fact, Medscape
has garnered several awards for its design and organization over the past three
years.
"If you're a psychiatrist, you're going to be very
hard-pressed to get information organized the way we have done it for
you," he boasts. "We have the largest collection of full-text,
peer-reviewed articles. That's a big mouthful, but those are really important
words. There are a lot of sites that just give you an abstract. If you want the
full article, you have to order it. You can't get the full article online. But
on Medscape you can."
Frishauf says that despite mass predictions of Medscape's
future success, the company is not taking anything for granted. "We keep
raising the bar everyday," he says. "Everyday, the site gets
better." Earlier this week, Medscape announced a number of improvements to
its site, including additional options for customizing the home page for the
user's specific needs. For example, a psychiatrist can customize his or her
browser to make Medscape immediately download the latest psychiatric news and
data, thereby skipping other specialty areas, such as cardiology, oncology or
optometry, which may not be of interest to the user.
"We are passionate about being advocates for our
readers," he says. "Our objective is to help clinicians take better
care of sick people and to help them maintain the health of healthy
people."
As for doing their part to make Wall Street healthier,
Frishauf will not say when the company will answer calls to go public. Many
reports believe the addition of Sheils as CEO has established a management team
capable of running a public company. Translation: Medscape seems to be close to
an IPO.
Copyright © 2000 by Virtual
Advisor, Inc. All rights reserved.