Is Aesthetic Medicine the Optimal Monetization Pathway in Internet Healthcare? — Insights from the 'Xingdong Medical Salon' Public Course

Event Name: Day 2 of the Xingdong Xiangyi Hui Open Lecture
Event Dates: November 7–8, 2015
Organizers: Legend Star, VCBeat, BlueRun Ventures

▍Guest Speaker:

• Yibo Cao, Managing Director at Vivo Capital

Cao Yibo possesses extensive experience in the Chinese pharmaceutical industry. Prior to joining Vivo Capital, he served as the Head of Strategy and Business Development for Nycomed’s North Asia region, where he played a key role in restructuring Nycomed’s operations in China.

• Liu Di, CEO of Gengmei

In July 2015, the medical aesthetics app “Gengmei” completed a Series B financing round worth tens of millions of U.S. dollars, led by VIVO Capital and participated in by Sequoia Capital.

At the public lecture of Xingdong Xiangyi Club, Cao Yibo, Managing Director at WuXi Capital, and Gengmei, a mobile healthcare project invested by him (for details on the Gengmei app, please refer to the VCBeat article “Gengmei: Aesthetic plastic surgery is consumer healthcare, not a medical product.》。）delivered a speech to the participants on “How to Excel in B2C Marketing.”

Cao Yibo: Why ViroHealth Capital Has a Special Affinity for Medical Aesthetics Projects

Compared with other sectors in mobile health, medical aesthetics is a more consumer-centric (2C) industry. Other mobile health initiatives primarily target patients. Some joke that being unattractive is a disease that requires treatment, but this is merely in jest. In reality, the user base of the medical aesthetics industry consists largely of ordinary consumers.

Vivo Capital Managing Director, Cao Yibo

Vivo Capital was founded in 1997 and has offices in Shanghai, Beijing, and other locations. In the United States, Vivo Capital primarily invests in technology projects at the clinical development stage. Cao Yibo candidly stated that the partnership with Gengmei came about due to Vivo Capital’s particular affinity for the medical aesthetics industry.

Selected Medical Aesthetics Projects Invested by VIVO Capital

In February 2010, Vivo Capital invested in Revance, a company specializing in topical botulinum toxin. This revolutionary anti-wrinkle product is currently in Phase III clinical trials. We also invested in Tria, a company offering laser hair removal and skin whitening devices. Its products have already been commercialized and became best-sellers on Taobao even before their official launch in China, partly due to endorsements by lead actors in popular Korean dramas. Additionally, we have invested in projects such as Bioform, a provider of aesthetic dermal fillers.

In fact, VV Capital’s initial focus on the medical aesthetics sector was from a technological perspective. However,After the team’s observation of China, it was found that there are still many investment opportunities in the medical aesthetics sector within mobile apps.

Survey data indicate that China’s medical aesthetics market has reached RMB 50 billion, with an average annual growth rate exceeding 30%, and still holds substantial room for expansion. In 2014, there were approximately 5 million procedures nationwide, including about 3.5 million non-invasive treatments and 1.5 million surgical procedures. Furthermore, the average transaction value in the medical aesthetics market is around RMB 10,000, resulting in annual national sales of approximately RMB 50 billion. This total ranks third globally, behind only the United States and Brazil. Cao Yibo stated that, on a per capita basis, China still has at least tenfold growth potential compared to South Korea, the United States, or Brazil. At the current growth rate, China’s medical aesthetics market is expected to reach the RMB 100 billion scale within two to three years.

Furthermore, the medical aesthetics market is plagued by numerous pain points. It is precisely these pain points that have created opportunities for internet-based medical aesthetics platforms to enter this traditional healthcare sector.

First, marketing expenses in the medical aesthetics sector are extremely high.When sales and marketing expenses are included, nearly 70% of resources in the medical aesthetics market are allocated to customer acquisition. Profitable medical aesthetics institutions derive their earnings largely from the relatively low promotional costs associated with retaining existing customers, whereas internet-based medical aesthetics platforms can generate business value by acquiring customers for hospitals at a lower cost.

Secondly, the quality of hospitals in the medical aesthetics sector is uneven, the evaluation system is inadequate, and some non-compliant hospitals exploit patients.Currently, in China, private hospitals and clinics dominate the aesthetic medicine market, accounting for 70–80% of the market share. Public hospitals with strong brand recognition are extremely rare; apart from Beijing’s Ba Da Chu Plastic Surgery Hospital and Shanghai Ninth People’s Hospital, there are no nationally renowned public hospitals in this field. Meanwhile, other private medical institutions, aside from a few chain brands, suffer from low visibility and exhibit certain irregular operational practices.

Hospitals’ “excessive marketing” makes it difficult for users to obtain accurate and credible information.Many private hospitals employ sales personnel rather than licensed physicians to market services to patients. Since the compensation of these sales representatives, and even medical aesthetic consultants, is tied to performance metrics, “aggressive selling” is commonplace. This prevents consumers from accessing fair and objective evaluations through traditional online and media channels, thereby hindering their ability to make informed decisions.

Furthermore, there is significant variation in the scale of aesthetic medicine institutions, with smaller facilities lacking effective patient acquisition channels.The significant differentiation in institutional scale is evident in the market, which features nationwide chains of cosmetic surgery institutions such as Yimeier, with individual locations exceeding thousands of square meters in operating area, alongside a predominance of small-scale clinics. While chain brands capture the majority of traffic through high-cost advertising channels (including search engine marketing and offline advertisements), many small and medium-sized hospitals and private clinics that offer reliable quality and more competitive prices struggle due to a lack of channels and resources for self-promotion.

The Three Core Values of Internet-Based Medical Aesthetics Platforms: Solutions to the Above-Mentioned Pain Points

First, to address the issue of inconsistent quality among hospitals, internet-based medical aesthetics platforms can establish stringent review criteria for participating institutions. These institutions must provide their practicing licenses and qualification certificates, and their credentials must be verifiable through the local health bureau before they can be officially listed on the platform.

Secondly, to address the issue of excessive marketing by hospitals, internet-based medical aesthetics platforms can enhance marketing transparency and mitigate information asymmetry through user and community feedback mechanisms. On one hand, by adopting a User-Generated Content (UGC) approach, these platforms enable users to evaluate doctors and hospitals based on real-life cases, ensuring impartiality and transparency of information. On the other hand, by employing a Business-to-Consumer (B2C) model and establishing in-house consultation teams, platforms can deliver more comprehensive services, leveraging their professional expertise as a guarantee of quality.

Furthermore, given the significant disparity in scale among plastic surgery institutions and the challenge small clinics face in attracting patient traffic, internet-based medical aesthetics platforms can integrate resources from small and medium-sized providers to create value for users and expand service supply sources. While large chain institutions are reluctant to be constrained by online traffic channels and subjected to price transparency comparisons, small and medium-sized clinics rely on such channels for survival and growth. By consolidating these resources, platforms gain greater bargaining power, enabling them to offer more cost-effective services to users.

Compared with the medical aesthetics markets in other countries, China’s market possesses unique developmental advantages. It is precisely these advantages that have created highly fertile ground for the growth of medical aesthetics apps in China.

First, the demographic profile of consumers in China’s medical aesthetics market is younger than that of Western markets, with white-collar professionals constituting the primary user base. Surveys indicate that over 50% of individuals undergoing cosmetic procedures in China are aged between 20 and 35, predominantly white-collar workers, a significant portion of whom seek aesthetic enhancements to advance their careers or improve their prospects in marriage. In contrast, this age group accounts for only 19% of cosmetic procedure recipients in the United States, where the majority are older individuals seeking treatments primarily to achieve a more youthful appearance.

Second, minimally invasive cosmetic procedures are the mainstream of China’s medical aesthetics market. Compared with traditional surgical plastic surgery, minimally invasive treatments (such as botulinum toxin injections for facial slimming and hyaluronic acid fillers) not only carry lower procedural risks but also have lower unit prices (averaging under RMB 3,000), making it easier for consumers to enter the field of aesthetic enhancement and build trust. Surveys indicate that the churn rate exceeds 90% after a consumer’s first aesthetic procedure, but drops to 50% after three to four treatments. Therefore, adopting a “small-scale, high-frequency” strategy centered on minimally invasive procedures can more effectively retain customers.

Third, users of medical aesthetics in the Chinese market have a strong propensity for social sharing. As young people constitute the main force in the medical aesthetics market and a growing number are undergoing minimally invasive procedures, the concept of “plastic surgery” has gained broader acceptance. Younger individuals are more willing to share their aesthetic outcomes on social media, which further encourages others to try such procedures. On the Gengmei app, many users share information about their procedures, with some even posting unblurred before-and-after photos. Within the Gengmei team, there are staff members dedicated to screening user-shared images.

Currently, the medical aesthetics industry is attracting significant attention from investors, with many companies securing substantial financing. Cao Yibo believes that the industry still needs to address certain issues, such as the inability to curb excessive offline upselling and the lack of clear service standards.

Liu Di: To capture users, one must first precisely identify their location.

Liu Di comes from a family of physicians and is a serial entrepreneur in the mobile health sector. In 2009, he launched his first healthcare internet company. For his initial venture, Liu Di established an online community connecting patients and doctors dealing with rare diseases. Like many first-time entrepreneurs in the digital health space, he aspired to create a project that could “save the world.” However, Liu Di soon realized that the venture lacked a viable monetization model. Consequently, in 2011, he abandoned the project and joined Chunyu Doctor. Between 2011 and 2013, Liu Di served at Chunyu Doctor as Product Director, then Marketing Director, before ultimately becoming Vice President of Business.

Gengmei CEO Liu Di

In 2013, Liu Di left Chunyu Doctor and embarked on the entrepreneurial journey of the “Perfect Clinic” project, operating solo with a Weibo account. The project was later renamed Gengmei.

Gengmei defines the domain of the consumer healthcare market.

In China, the basic healthcare market encompasses services such as hospital visits for illness, medication purchases, and inpatient care. In contrast, the consumer healthcare market refers to health-related products and services that are not covered by hospitals or medical insurance, but which healthy individuals voluntarily purchase to maintain their well-being and enhance their quality of life. This sector includes plastic surgery, ophthalmology, andrology, obstetrics and gynecology, dermatology, and psychiatry, among others.

Liu Di stated that Gengmei is the company with the closest customer connections in the internet healthcare sector. For an internet healthcare enterprise, the biggest challenge lies in attracting both physicians and users. Unlike most companies, Gengmei’s primary shortage at its inception was not users, but physicians.

How to Attract China’s Top Plastic Surgeons to the Platform? Liu Di believes that the key lies in understanding the distinct needs of doctors, hospitals, and users.Hospitals possess professional expertise and provide specialized content to build user trust; however, their brands often struggle to gain visibility. Therefore, it is essential to establish channels for brand building for these doctors and hospitals. As an internet company, Gengmei has the resources to help hospitals and doctors promote their brands. In turn, internet healthcare platforms can leverage this approach to secure resources from doctors and hospitals.

Compared with physicians in other departments, plastic surgeons exhibit greater independence. For them, attracting patient volume and generating revenue are of paramount importance. Gengmei’s strategy was to first secure the most prominent physicians in the industry. Their first target was a leading figure in China’s plastic surgery sector. Gengmei produced a video featuring this industry leader’s insights on the medical aesthetics field, promoting “Perfect Clinic” (the initial name of Gengmei’s product). This campaign successfully attracted a large number of renowned plastic surgeons to the platform.

At the end of last year, Gengmei, which had already achieved remarkable success on the provider side, turned its attention to the consumer side. Liu Di continued to leverage video content to attract users. Prior to producing the videos, Gengmei developed detailed personas of its target audience and collected data from over 1,000 target users to formulate its video content strategy. The resulting video series, released weekly, was distributed across major Chinese video platforms and has accumulated more than 300 million views to date, playing a significant role in Gengmei’s acquisition of B2C users.
Liu Di, born in the 1980s, candidly shared many insightful practical insights at the conference, including marketing strategies that had never been publicly disclosed before. However, out of respect for Mr. Liu’s wishes, VCBeat will not make these details public. We welcome everyone to actively participate in VCBeat’s offline events in the future to gain access to first-hand, high-value content.

Liu Di stated that for a company’s B2C marketing, getting product market positioning, data analysis, and brand structuring right yields twice the results with half the effort.

▍Q&A Highlights:

Q: The app’s monetization model relies on traffic redirection. Given that overtreatment is a serious issue in China’s medical aesthetics industry, particularly among Putian-affiliated providers, how do you control this risk?

Liu Di:On one hand, I believe that from the service supply side, we must define what kind of doctors and institutions should provide services. Because our industry is particularly chaotic, it actually presents an opportunity for internet companies or platforms. When people lose trust in the industry as a whole, they have no choice but to place their trust in us. Once top-tier schools, hospitals, and doctors join the platform, it becomes relatively smooth to expand and onboard mid-tier hospitals and doctors, as they will be willing to join. Fudan University publishes an annual departmental ranking. In the year we founded the company, we listed the plastic surgery departments of the top 26 best Grade A tertiary hospitals in China, and spent two to three months inviting those doctors to join the platform. Only after that did we gradually open registration to doctors from other public hospitals. Medical aesthetic consumers are not price-sensitive; if a doctor can truly deliver superior results, consumers will still purchase their services even if they are one or two thousand, or even ten to twenty thousand yuan more expensive than those of other doctors. More importantly, they trust that the medical services provided through your platform are genuinely high-quality. As long as we can demonstrate that China’s best doctors and finest medical resources are available on our platform, users will be willing to pay a brand premium for any service offered on our platform.

Cao Yibo:No channel can entirely avoid the presence of subpar merchants. Our aim is certainly to employ a more professional and principled approach to filter out physicians with inadequate professionalism, rather than targeting any specific individual. Furthermore, there is no perfect, fully objective method to prove that a platform is superior. When making investment decisions, we also need to conduct a comparative analysis of other similar business models. For instance, among 30 partner merchants, whether Gengmei enjoys higher brand recognition serves as a relatively objective indicator.

Cao Yibo and Liu Di Answering Questions from On-Site Attendees

Q: Have you considered the legal risks of using celebrity plastic surgery as a sensational angle?

Liu Di:It is an established fact that virtually everyone in the entertainment industry has undergone some form of cosmetic surgery. Furthermore, we made thorough preparations before proceeding with this initiative. Meanwhile, should a dispute arise between our product and a celebrity, provided we are ultimately found to be without fault, it would serve as a valuable opportunity for positive exposure.

Question: Where are users most densely concentrated?

Liu Di:It is increasingly difficult to reach users today; however, consumers within specific niche markets are relatively concentrated. The most critical task is to identify the online spaces where our target users congregate. For us, Sina Weibo offers the most cost-effective channel for user acquisition. It is essential to clearly define your consumer demographics. Furthermore, we must maintain high sensitivity to data and understand the cost-effectiveness of various platforms in order to select the ones best suited to our needs.