DXY Doctor Valuation in the Second Wave of Internet Healthcare: Backed by 1.4M Doctors and 20M Users, IPO Filing Submitted

Whether it is the gathering of 17 internet hospitals in Yinchuan or Haodf’s $200 million Series D financing round two years later, both seem to herald the arrival of the second wave of digital healthcare.

From the application scenarios of internet hospitals, leveraging the connectivity capabilities of internet technology and utilizing technologies such as electronic medical record sharing and remote high-definition audio-video communication directly facilitates online follow-up consultations and remote consultations between doctors and patients. Whether in remote mountainous areas or developed cities, the public can access medical services of equivalent quality, significantly enhancing the utilization efficiency of high-quality medical resources and improving service accessibility.

It is evident that online consultation serves as the cornerstone of internet hospital operations. Among the current market participants, in addition to pioneers such as Haodafu and Chunyu Yisheng, DXY has also entered the fray.

Dingxiang Doctor is a strategic initiative in DXY’s consumer-facing business, designed to comprehensively meet users’ needs for health education, online consultations, medication inquiries, and healthcare provider recommendations, thereby delivering one-stop medical services.

Previously, Haodifu’s valuation reached RMB 10 billion in its Series D funding round. So, what is the value of Dingxiang Doctor, which supports the launch of Dingxiang Yuan’s Yinchuan Internet Hospital?

There Is No Such Thing as a Free Lunch: “Free” Is Merely a Guise. Especially in the Internet era, the core of “free” is to attract users with complimentary services, while companies leverage these free offerings to generate profits from third parties.

For the healthcare industry, the DXY team aligns with Apple CEO Tim Cook’s view that “free is always the most expensive,” a theory also frequently cited by Jack Ma. Of course, this perspective remains controversial within the industry.

Chu Yang, Vice President of DXY and Head of Dingxiang Doctor, has 11 years of experience as an orthopedic surgeon and boasts 200,000 followers on Zhihu. He believes that only doctors truly understand the real needs of both patients and healthcare providers; therefore, extensive consultations with physicians were conducted during the design of the Dingxiang Doctor product prototype.

Moreover, influenced by the broader trend of consumption upgrading in China, Chu Yang believes that healthcare holds the greatest potential to become the new standout sector in this upgrade. Therefore, he never intended to offer free consultation services from the outset. A payment barrier can filter out invalid queries and noise, leaving only the questions that patients truly care about, thereby allowing physicians’ value to be fully realized.

However, since the advent of online medical consultations in China, they have been mired in controversy on various fronts, including whether platforms possess diagnostic and treatment qualifications, the practice of subsidizing physicians through heavy cash burn, and the implementation of multi-site practice for doctors.

According to Analysys statistics, the market size of the mobile healthcare industry has been rising year by year, reaching RMB 10.56 billion in 2016, a 116.4% increase from 2015. Analysts believe that although mobile healthcare accounts for less than 1% of the entire healthcare market, this indicates substantial room for growth within the existing market. It is projected that the market size of the mobile healthcare industry will exceed RMB 20 billion this year.

Chu Yang told VCBeat, “Although Dingxiang Doctor entered the market relatively late, this does not mean there are no opportunities.” On the contrary, he firmly believes that only by “planning carefully before taking action” can one break through the intense competition.

“Without a clear strategy, securing an early position is futile,” said Li Tiantian, founder and chairman of DXY.

According to Chu Yang, the DXY team currently operates two main business lines. One is a WeChat new media matrix centered on DXY Doctor, DXY Mom, and Health Headlines, with over 20 million followers, consistently ranking among the top tier of online health science communication platforms in China.

“In 2016, our new media platforms produced 26 million words of health science popularization content, accumulating over 1 billion reads. This year, we are implementing multi-channel distribution of our content, with an annual target of achieving 4 billion reads.”

Another business line is the DXY Doctor app, which focuses on paid medical consultations. In fact, as early as July 2016, the team launched a WeChat-based paid consultation product to test the waters.

“After more than six months of operation, we have found that pre- and post-consultation services are a rigid demand for users, with data showing a continuous upward trend,” said Chu Yang. It is precisely based on this that the decision was made this year to migrate the entire online consultation business to the Dingxiang Doctor App.

According to operational data, as of Q1 2017, the Dingxiang Doctor app maintained a stable daily volume of approximately 10,500 inquiries. The platform does not offer free consultation services; the base fee starts at RMB 10, with most consultations priced around RMB 20, while some physicians are permitted to set their own rates.

In addition to paid consultations, DXY Doctor adopts an invitation-only model for onboarding physicians, accepting only attending physicians (or above) from Grade 3A hospitals who meet the eligibility criteria. Currently, there are only 9,973 physicians on the platform.

Chu Yang also stated that Dingxiang Doctor’s online consultation service does not emphasize rapid physician response; the platform commits to having physicians answer user inquiries within 24 hours.

Additionally, it has introduced Taobao’s review system and Fenda’s paid reading mechanism. Patients can rate doctors and set the doctor’s responses to public visibility, requiring other users to pay 1 yuan to view them, with 0.5 yuan going to both the patient and the doctor.

“We need to strictly control the quality of the supply side by selecting doctors who possess exceptional professional expertise, excel in communication, and demonstrate enthusiasm and patience, thereby providing users with the most professional services.” This was Chu Yang’s original intention in designing the product.

"Not emphasizing rapid response is intended to better protect physicians' rights and interests. If a patient requires emergency care, we do not recommend using the Dingxiang Doctor App; going directly to a hospital is the safest option. However, for common and chronic conditions during pre-consultation or post-consultation phases, where timeliness is less critical, a response within 24 hours on Dingxiang Doctor is perfectly acceptable for users."

“Although a response within 24 hours is promised, 90% of doctors on the platform can respond within 15 minutes.”

The introduction of an evaluation mechanism is designed to consistently maintain high-quality standards among physicians. In addition to allowing users to directly rate their doctors, the platform conducts daily random audits of consultation cases by professional medical reviewers.

Meanwhile, doctors’ responses are also reviewed by DXY’s “Expert Review Panel,” a mechanism known academically as “peer review,” which is the standard process used by most international journals to screen submitted manuscripts.

“Most of our peers focus on the concepts of being free and offering rapid response, but we have always regarded supply-side quality and ultimate service as the foundation of our business,” said Chu Yang.

“At this stage, our true competitor is actually ourselves; the most critical priorities are how to refine our products and how to effectively cultivate user habits.” Given that the penetration rate of online medical consultations in the Chinese market remains below 20%, the real revolution has yet to arrive.

Under the prevailing trend of consumption upgrading, the transformation and upgrading of consumption structures are driving growth in related industries. In this process, consumption in sectors such as education, entertainment, culture, transportation, telecommunications, healthcare, housing, and tourism is growing most rapidly, with particularly swift growth in consumption linked to the IT, automotive, and real estate industries.

Furthermore, paid premium content is gradually gaining traction and increasingly favored by users. Early entrants such as Fen Da and Dedao were followed by Himalaya FM and Zhihu Live; even Douban, which has long catered to niche audiences and cultivated an image appealing to artistic youth, has launched its own paid product, Douban Time.

If paying for knowledge is already so popular, why not pay for health and for one’s body?

Chu Yang introduced to VCBeat the current prospects and advantages of DXY:

First, in terms of the number of physicians. Although DXY Doctor currently has fewer than 10,000 physicians, it is backed by DXY’s 1.4 million real-name registered physicians.

Secondly, an agreement was signed with the Yinchuan Municipal Government to establish the DXY Yinchuan Internet Hospital, which will serve as a traffic entry point for Dingxiang Doctor upon completion.

Last month, the Yinchuan Municipal Government announced that insured individuals can not only use their personal medical insurance accounts to directly pay for online consultations and medication purchases, but also have online consultation fees reimbursed if they fall within the scope of the basic medical insurance’s “Three Catalogs.” In other words, medical services provided by internet hospitals are now covered by medical insurance in the same way as those provided by physical hospitals.

Finally, DXY, with its health science popularization platform boasting tens of millions of followers, can also drive traffic to Dingxiang Doctor.

Chu Yang explicitly stated that the DXY Doctor team will soon be spun off from DXY to pursue independent financing.

In a sense, Haodaifu’s new round of financing will be beneficial to the industry. Perhaps, riding this wave, the once-quiet internet healthcare sector can return to the spotlight.

Data Notes:All data in this article were provided by interviewees or obtained through public searches.