Think Gene Think Gene RSS

a bio blog about genetics, genomics, and biotechnology

DNA Helix

23andMe Is DTC Genomics and Nobody Should Be Surprised

September 11th, 2008 by Andrew Yates

23andMe has dropped their price by $600, and some have cited this and me as harbingers of doom.

First, when I say that an industry is “dead,” that doesn’t mean that all businesses shut down overnight and nobody buys anything ever again. It means that the assumptions of a business model seemed flawed with reasonable confidence. So, by that model, new businesses are unlikely, and existing businesses will evolve or fade away. Fly-by-nights may vanish overnight, but that’s why they’re called fly-by-nights.

So, relax.

Second, everybody knew that 23andMe would drop their price from day one. The test was too expensive. The science was getting cheaper. Everybody said so; everybody knew this. BEHOLD! 23andMe’s new product is marginally better and 60% cheaper. If you paid $1000 for 23andMe.v1, and you are pissed, and you demand a refund —you are a fool.

So, as expected.

Yes, I’ve heard the chatter. “But you know, DTC genomics really makes their money from selling the results to pharma…” But that’s speculative revenue from a product that doesn’t quite exist, not cash flow from paying customers now, and companies pay expenses in cash, not VP BIZDEV! “partnerships.” If investors actually believed this story, they would fund companies that sold tests for much less than thousands of dollars to build this database and sell it. They don’t believe this, so instead they funded companies that sold tests for thousands of dollars, hoping that the brand and operational experience built in the meantime would give them an advantage if a market for genomic databases materialized.

The story is that Coriell is building that genomic database. GO PAY ATTENTION TO CORIELL. They offer real medicine and do real science!

Not relevant to the “database sale discussion” is deCODE Genetics, a genomics research company, who probably trusts itself to use its own deCODEme genomic data for its own genomic research

Now: The faerie tale about DTC startups selling data to pharma is dead; let’s talk like adults about real customers who pay cash money for real products.

Which startup can make sales?

23andMe.

Which startup has the best product?

23andMe.

Which startup has the best brand?

23andMe.

Which startup has money and talent to operate and evolve despite an increasingly skeptical investor community and a dead business model?

23andMe.

Which startup is so loved by the media that Rupert Murdoch will smell his own piss to be in their blog?

23andMe.

Which startup was founded by one of the most powerful, richest families in the world?

You’re right, I did lose a million dollars last year. I expect to lose a million dollars this year. I expect to lose a million dollars *next* year. You know, Mr. Thatcher, at the rate of a million dollars a year, I’ll have to close this place in… 60 years.

Haha, I was just kidding. Real customers paying for real products doesn’t matter in this business.

People, 23andMe isn’t going anywhere. They are the Bill & Melinda Gates Sergey & Anne Brin Foundation, Silicon Valley style. Anne Wojcicki is married to Sergey Brin, so 23andMe has access to all the talent, connections, and capital 23andMe would ever need to make 23andMe work. Thus, assuming 23andMe doesn’t do anything egregious, they will exist for as long as Mrs. Anne Wojcicki Brin pleases it to be so. If 23andMe shuts down, it won’t be for some mundane reason like the bills weren’t paid, it will be because Anne felt like it. One thousand Coriells wouldn’t change that.

What, does that offend your meritocratic, democratic, American dream sensibilities? Too bad. Go get an Ivy+ degree and marry your own richest man in the world.

People like 23andMe. I like 23andMe. People buy 23andMe tests. I bought a 23andMe test. They’re the best, they can make sales, they have the best product, and someday, they might even “sell” their database to Google. So what? Doesn’t matter. All of that is just something plus infinity.

End of story.

History Remembers Navigenics:

Navigenics thought that they could be Internet Doctors, but they sell premium commodity non-medical medical information, exclusively available to everyone on the web. What do medical specialists charge? Durrr, let’s put a picture of a doctor on our website charge that!

If anybody in medicine was ever going to take Navigenics seriously, Coriell quite clearly dispelled that idea. They don’t have customers, doctors hate them, scientists don’t trust them, Navigenic’s product sucks compared to 23andMe, and unicorns carried their database-pharma-sale story back over a rainbow to happy magic land. Who cares what Navigenics thinks anymore?

As for consumers? I am a fan and customer of 23andMe. You found me. We exist. I challenge anyone to find a single happy customer of Navigenics.

Navigenics: at least they didn’t commit insurance fraud.

History Remembers deCODEme:

I really want to like deCODEme. I do. Not because deCODEme is so great, but because they flew me to Iceland once for a job interview, and I appreciate that. Sure, too many people gave me the “run away unless they pay” speech, but they still have a special place in my heart because, let’s face it, Iceland is kind of a cool country. Maybe the Icelandic government will bail them out, or maybe Kari will hop into a viking ship and raid England or something. But, sorry, deCODEme is just not competitive with 23andMe, and until I’m convinced otherwise, when I say DTC genomics, I mean 23andMe. But, they’ll continue to exist as long as deCODE does someway or another. Running a Ruby-on-Rails website is cheap.

deCODE did start a new blog, though. Check it out! deCODEyou

NOTE: “VP BIZ DEV!” is to be read as if you are barking a college football slogan while chugging a natty and wearing a jersey featuring no less than one food stain.

Tags: , , , , ,

Viewing 6 Comments

    • ^
    • v
    Hello. I was reading someone elses blog and saw you on their blogroll. Would you be interested in exchanging blog roll links? If so, feel free to email me.

    Thanks.
    • ^
    • v
    Thanks for the insult.....
    Good post...
    -Steve
    www.thegenesherpa.blogspot.com
    • ^
    • v
    Haha, Steve, it's not my fault you asked for a $600 dollar refund on a product you didn't even buy. I do think it's a bit silly that you love to lambaste 23andMe. Take them for what they are: how I described them here. You can bing them when they play Internet Doctors, but otherwise, lighten up. I don't see a picture of a doctor on their home page, and royalty can do whatever they want. Get used to it.
    • ^
    • v
    I think you're right on. First if I was a customer, I'd be pissed about my $600. More importantly, I think they're destroying the value of the market (or accelerating the evolution of the market). But isn't the $1000 genome a selfish and naive argument made by academics and VCs? Focus focus focus on the customer. In the real world, the genome will be free and you'll be charged a subscription for value-add services - because this is the only thing a customer is willing to pay for. Which means this whole industry (just like in IT - think Dell) is in a race to commoditization and doesn't know it yet.

    Being essentially backed by google - if 23andme is willing to use the nuclear option of basically giving it away, everyone else will soon fade away (because organic growth is unsustainable), unless they have deep pockets - but then what investor would work against google's deep pockets.

    So in 3-5 years, this is what we have:
    There are 1-3 big players left. Their business model is to offer lots of value added services. Their founders are replaced with real managers who don't make naive mistakes. 23andme stuggles as people become increasingly suspicious of google. No smart VC will get near this area including the vastly overvalued $1000 genome platform startups (b/c it's a race to commoditization). Everybody is still struggling to find customers - mostly because physicians resist the idea because they are (by law) disintermediated in the sale, and nobody offers clinically validated/FDA approvable services (it will take 10-15 years before we get there) and the physicians don't want to deal with that complexity/liability of genomic medicine anyways. Not to mention payors will refuse to play along.

    So the business model evolves to a few flavors, such as (1) giving the service away, and $10-$20 per month subscription to hold your data and give updates banged into the system by chinese post-docs or grad students. (2) wiki style platform to which open source informatic widgets allow you to slice and dice your own data set (that is hosted for $10 per year by some patient advocacy nonprofit) and anonymized so that academics can do research on it for free and pharma pays a small use fee. (3) myspace etc. develops a service.
    • ^
    • v
    23andMe, NaviGenics, DecodeME are all toast. Why? What do you do with the information? Are you really going to become a vegetarian, start jogging 6+ miles a day, and lose 30 lbs because NOW you know you have the ApoE4 variant?

    No one has shown how the data from the OTC genomix companies will integrate with MRI, HDL/LDL, blood-glucose and other data because no-one knows how.

    A gimmick for the rich and foolish....
    -sm-
    • ^
    • v
    23andMe is selling promises and hot air.

Trackbacks

  1. Gene Genie #37: Human Genomes Are a Dime a Dozen » The Genetic Genealogist
    September 14, 2008 @ 12:45 pm

    [...] the death-knell for the industry?” at Genetic Future.  Andrew at Think Gene writes “23andMe Is DTC Genomics and Nobody Should Be Surprised” and “Why the “Database Sale Story” is Silly.”  This in turn is mentioned by [...]

  2. New advances in personal genomics | brainhealthhacks.com
    September 23, 2008 @ 10:54 am

    [...] Price is one limiting factor for lack of adoption of personal genome scanning and its potential to lead to better health treatments (pharmagenomics). Just a few months ago the standard price for the current generation of a personal genome scan (examining 500,000 to a 1,000,000 SNPs) was $ 999, but now one of the companies 23andMe has dropped their price to $ 399. This price range makes the technology available to a larger audience (but like any consumer electronic device if you can hold off another 6 months to a year things will even be cheaper - or you will get more for the same price). This story was covered by PIMM and thinkgene. [...]

close Reblog this comment
Powered by Disqus · Learn more