It is not easy to retain users for online medical services, even when you are a social media giant like Tencent.
Tencent Trusted Doctor, a joint venture backed by the internet giant, announced on Wednesday that it had secured $250 million in a first round of funding from nine large investors.
The deal has boosted Tencent Trusted Doctor's valuation to about $1 billion, making it China's latest unicorn, according to a source familiar with the matter.
A merger in August last year brought medical services platforms Tencent Doctorwork and Trusted Doctors together. Tencent Trusted Doctor offers a comprehensive private healthcare network with online and offline services including doctor appointments, online diagnosis and healthcare e-commerce via its platform.
Country Garden Holdings, Tencent and GAW Capital Partners led the round along with Sequoia Capital, CMB International, Russia-China Investment Fund, Harvest Wealth, Sensegain Asset Management and AVIC rust.
“The deal took about five-months time and shows that new investors want to diversify their holdings into a different sector,” Bin Wang, managing director of CEC Capital told FinanceAsia. CEC Capital is the exclusive financial advisor for Tencent Trusted Doctor.
For Tencent, this fundraising shows its faith in the clinical platform business, even if that means that it needs to get external help to expand.
Last month, Tencent shut down its own medical platform called Teng Ai Doctor. It was designed to convert online patients to clinics and doctors, but a 15% conversion rate was not enough.
Since then Tencent has directed its users to Tencent Trusted Doctor. This was viewed as a move to center Tencent’s existing resources for a greater share of healthcare traffic. “Tencent Trusted Doctor can get the volume and technical support from Tencent to improve the service experience for patients,” said Daosheng Tang, senior executive vice president of Tencent.
A DEVELOPING MARKET
It is not easy for Chinese patients to accept online medical consulting. Most are more used to bricks and mortar hospitals and only 7% of patients who go to hospitals would use an online service.
Even for early movers in the market, more people and maintaining patients is still the primary focus. On the earnings call for Hong Kong-listed Ping An Healthcare and Technology in February, chairman Wang Tao said that the company is still in the process of gaining as much traffic volume and data as possible.
Online medical service platforms are focusing on how to make patient to stay longer. Health management is the most effective approach – and the most profitable one too. Ping An Healthcare and Technology, also known as Good Doctor, reported a 81.5% gross profit rate from its health management and interaction business. With the help of artificial intelligence to interact with patients, Ping An Good Doctor said it intends to expand its family doctor business to become a more profitable business.
This is a huge market that need to be served. The number of patients who use online consulting and diagnosis services is expected to grow 35% year-on-year until 2025. “User habits and service experience is gradually changing in China,” Wang said.
Tencent Trusted Doctor fundraising is part of this change. The company intends to set up more than 500 offline clinics in China by 2021 to provide even more efficient medical services, according to its CEO Wang Shirui. Although this number is still relatively small compared to the Chinese market as a whole, it is a good starting point for a new world of long-term stable medical services that are available online and offline.
This article has been updated to insert new information in paragraphs three and six
This article has been corrected in paragraph six to fix the name of the CEC Capital executive
