July 12, 2022

Red Ventures Creates JV With UnitedHealth

When we think of ways to monetize media assets, we tend to think of ads and subscriptions. But there are other ways to do it if you’re willing to get creative.

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Now let’s jump in…

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Unless you read healthcare news (like Aging Media’s John Yedinak), you’d likely have never seen this. According to Axios, UnitedHealth Group and Red Ventures created RVO Health, a joint venture that combines Optum Health assets with the Red Ventures healthcare portfolio.

The ownership structure of the joint venture is not clear, but, per Moody’s: RV received cash proceeds in exchange for contributed assets, which were used to pay down a term loan.

That gives it consumer health offerings ranging from Healthgrades, which offers doctor reviews, and Healthline, which provides medical information and guidance, to the prescription drug saving cards provided by Optum Perks and home delivery of health and wellness products via Optum Store.

This is a fascinating deal. If you look at Red Ventures’ sites, we’re looking at a ton of users. According to SimilarWeb, Healthgrades had 17.5 million visits last month, and Healthline had 229.2 million visits. That’s a lot of people. And then, if you look at Optum Perks and Optum Store, you’ve got more active engagement opportunities versus just visitors.

In many respects, it looks like a linear commerce structure, just with healthcare products rather than consumer goods. In essence, Healthgrades and Healthline—and there are other sites in the network—can promote the offerings from Optum Perks and Optum Store.

Let’s use a real example. Optum Store, an e-commerce site, sells Thorne vitamins. Healthline has a review of the “15 best vitamin brands of 2022.” What’s top of the list? Thorne vitamins. At the end of the review, there’s a button to shop at Amazon.

But now that Healthline and Optum Store are part of the same network, Healthline can direct the traffic to the owned e-commerce experience, which will likely have much better margins than the low-cut Amazon affiliate rate.

Or, if your doctor prescribes you medicine and you decide to read up on the symptoms at Healthline, perhaps you can see an Optum Perks advertisement, which has coupons for expensive drugs.

In both these scenarios, RVO Health (JV name) will be able to drive a ton of traffic from its network of sites to the higher-margin revenue opportunities.

Axios’ story on this comes from a Moody’s report. This one part is worth exploring:

RVO Health combines UHG’s scale of 120 million customers and 50 million members with RV Health’s 95+ million monthly unique visitors to create a compelling consumer digital health platform of complementary assets. The JV will accelerate RV Health’s access to new products, services and solutions, as well as provide access to a sizable first-party data audience, while UHG will enhance its digital transformation and momentum from Red Venture’s technology platform and digital marketing expertise.

Ironically, my ad copy was about 1st-party data, and now these two firms are creating a JV, in big part because of 1st-party data. The reality is that brands that do not have this data will be at a disadvantage. How many other healthcare-first businesses will have this much information about 100 million+ people? This can unlock so much potential for advertisers and the owned, down funnel assets.

Does it mean it’ll work?

It’s hard to say, to be honest. On the one hand, the idea is a great one. A full-funnel health-oriented business is very smart. Much of the content that Red Ventures created is perfectly suited to promote other parts of the portfolio. But on the other hand, joint ventures are complex. Running your own business is a lot of work; getting the same commitment of work when you only own part of the business is challenging.

But how much did this deal go for? In Moody’s report:

…the company repaid $1.289 billion of the term loan on 30 June 2022 ($1.23 billion currently outstanding post-repayment). In connection with the debt repayment, Red Ventures announced that it completed the formation of a new joint venture called RVO Health (JV) with UnitedHealth Group Inc. (UHG) in which RV contributed its healthcare assets (RV Health, primarily consisting of the Healthline and Healthgrades businesses and accounting for roughly 20% of company earnings) and UHG contributed a portion of its Optum Health assets. Under the terms of the JV arrangement, in exchange for the contributed assets, RV received cash proceeds, which were used to pay down the term loan.

RV Health was about 20% of company earnings. According to Moody’s, “RV’s EBITDA pro forma for the deconsolidation of RV Health is $319 million.” So, if RV Health was 20% of earnings, that would suggest that RV Health generated about $64 million in EBITDA ($319 million + 20%). In the report, Moody’s also says, “including $300 million of proceeds from the contribution of RV Health to the JV.” So, if $300 million is what Red Ventures got to contribute its assets to the JV, that would suggest a multiple of 4.7x trailing twelve-month EBITDA. But that doesn’t consider what percentage of the JV Red Ventures owns, which would increase that multiple.

Maybe my math is off, but I remain convinced that this is a very unique and exciting way of unlocking value. Red Ventures has a massive audience; Optum has various down-funnel products. By combining the two, this new business will be able to unlock monetization that most other health-specific media companies can only dream of. Couple that with the 1st-party data, and this is a compelling deal in the making.

Can we agree opinion sections suck?

I’ve long felt that one of the ways news organizations can improve readers’ trust is by removing opinion sections. Unfortunately, most readers can’t tell the difference and, therefore, use opinion sections as evidence that the news organizations are biased.

And sometimes, the opinion section does even more harm. For example, according to New Jersey Globe:

A Gannett-owned newspaper in Florida is under fire after publishing a guest column that defended the Proud Boys as “caring fathers” but did not disclose the author was married to a member of the organization.

Gannett owns nine daily newspapers in New Jersey.

The Sarasota Herald-Tribune deleted the column from their website – it ran in their print edition on Sunday and apologized for running it at all.

I imagine this is why Gannett has urged its newspapers to get rid of its opinion sections. According to a Washington Post story published back in June:

The nation’s largest newspaper chain is of the opinion that its opinion pages are alienating readers and becoming obsolete.

So newspapers owned by Gannett Co. — publisher of USA Today and more than 250 dailies — have begun to radically shrink and reimagine their editorial sections, publishing them on fewer days each week and dropping traditional features such as syndicated columns and editorial cartoons. Even political endorsements and letters to the editor are being scaled back.

The company has been pushing for the cutbacks for years, and they have become increasingly visible to readers since a committee of editors formally recommended them at a meeting in April. “Readers don’t want us to tell them what to think,” the editors, who come from Gannett newsrooms across the country, declared in an internal presentation. “They don’t believe we have the expertise to tell anyone what to think on most issues. They perceive us as having a biased agenda.”

I very much agree with this. However, trying to blend original reporting, which likely touches on things that will enrage people, and then offer political endorsements and opinions about a multitude of hot-button issues, which is equally enraging, does a lot more harm than good.

I would be shocked if opinion sections ever truly went away. But I would support that move in a heartbeat.

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