Shares in WebMD (WBMD), up 25% in the last two weeks, took a tumble on the NASDAQ after ThinkPanmure analyst William Morrison downgraded the company on a Q2 ad slump. Morrison downgraded the stock from “Source of Funds” to “Sell” after his research indicated the number of ad campaigns running on WebMD are down 6% in Q2 from Q1 and new advertisers are down 50%. This, in what is generally WebMD’s strongest quarter.
Morrison started tracking online ads on WebMD in January. In the first quarter, the company had roughly 640 ad campaigns (WebMD reported 628). Eleven weeks into Q2, he’s counting 562 campaigns, down from 600 at the same point in Q1. The study excludes pricing, so doesn’t indicate what rate WebMD is getting for those ads.
Two factors potentially hurting WebMD: first, a slowdown in health-related advertising, and second, WebMD is getting stiff price competition health-related ad networks which are charging lower CPMs. Morrison says ADSDAQ by ContextWeb has leapfrogged onetime leader WebMD in online reach in the health and wellness category.
WebMD cut guidance in April, but Morrison thinks it’s still too aggressive. Unless, of course WebMD gets acquired for the same multiple as CNET, which would imply a price of $41 a share.
See Also: Internet Ad Slowdown Hits WebMD