Do you remember Healtheon?  It was the company founded by the legendary entrepreneur Jim Clark (his 3rd billion-dollar venture, after SGI and Netscape), with backing by the legendary VC John Doerr.  The idea and the company’s early stages were chronicled in the book The New New Thing by Michael Lewis.

Healtheon had an impressive promise:  the trillion-dollar diamond made famous in Lewis’s book.  The company would be situated in the middle of the busy intersection of patients, providers, pharmaceutical companies and insurance companies (payers).  It went public (HLTH).  The stock went over $100 in bubbly 1999.

Then what?  As a public company, in May 1999, it merged with the private medical content site WebMD, eventually takings its name.  Today it’s a medical information portal, with its stock price floating around $10.

Have you paid attention to your dealings in the healthcare sector lately?  Last week I received a bill for care that was provided over 3 months ago, which I had already paid.  Next time you are in your primary care physicians office, observe the office environment.  Take note of the stacks of files and paper.  Then, talk to your doctor about his practice costs.  We have not even gone into the litigation system in the HC industry…

To make a long story short, the sector is inefficient and burdened by excessive litigation, driving the costs to record increases.  HLTH had a good idea, but apparently the bubble busting and the industry’s resistance to transparency and efficiency, combined to marginalize the company into a content provider as opposed to a transaction enabler.

Too bad for all of us.  I am looking forward to see the next set of superstars to tackle this messy area.

What are the factors that have contributed to the growth of e-commerce?  I think basic trust is an important one, followed closely with information security improvements (e.g. SSL).  However, one factor has long been in place before the internet: Payments and remittance infrastructure, beginning with the post office, banks and their money transfer mechanisms, credit cards and ending with PayPal.

eBay bought PayPal in 2002, for $1.5B.  At the time, they had already acquired Billpoint, but had failed to gain marketshare against PayPal.  in 2002, 25% of eBay transactions were settled using PayPal.  In 2000, the rate was almost zero.  Meg Whitman had commented back then that the target rate was over 60%.

I have not been able to find out what that rate currently is, but browsing eBay, it’s easy to see that it must be very high.

I wonder if the infrastructure for peer-to-peer payment systems would disappear overnight, what would happen.  Would volume on eBay decrease permanently?  Would nervous shoppers move to stronger-brand merchants like Amazon, from the unknown counterparts on eBay?

I suspect so…  So for the markets where the auction market is still immature, is the infrastructure still too undeveloped?  I think an opportunity is hidden in the infrastructure side.