Doximity：医疗行业的枢纽——[Business Breakdowns，第236期]

This is Matt Russell, and today we are breaking down one of the more impressive B2B media businesses that I have come across, and that is Doximity. It's been called the LinkedIn for doctors, and with eighty percent of doctors on their platform, I think that's a fair categorization. But Jim Jones, partner and analyst at William Blair Asset Management, helped explain exactly how this one works as a business. So Jim gets into the community engine that works around medical professionals and for medical professionals. And yes, there is a social network, but it's the add-ons like the required continued education that doctors can do on platform, script signing, and all of those little tools that make a doctor or medical professional's life much easier. But the revenue engine is advertising, and you can probably imagine why this audience would be so valuable to a certain set of companies. But Jim gets into the nuance of how that spend works, why this is the business model that they've chosen. And I can tell you, when I was in the weeds of Colossus operations, I always looked at B2B media as the most attractive model, and Doximity's story is the perfect example of why. Now please enjoy this breakdown of Doximity.

All right, Jim. I’m excited to have you here to cover Doximity. As I was just telling you before we hit record, it’s one that’s somewhat near and dear to my heart: the idea of taking a professional community and building a great business around it. I don’t think it’s particularly well known to many people walking the streets. To a lesser extent, it might be known to investors. Maybe you could kick us off with an introduction to how you would describe what Doximity does, who uses it, and all those details to paint a picture of the business.

Excited to be here. Doximity may not be known by the common person walking around the street, but physicians know who Doximity is. It’s a digital workflow platform purpose-built for healthcare professionals: doctors, registered nurses, graduating students, nurse practitioners, and physician assistants. Those are the people on the platform, and they spend a lot of time on it.

What are the use cases for them day to day? Obviously, it’s going to be different for someone still in school versus a doctor, surgeon, or whoever might be using it in the workforce. What would be some of the day-to-day use cases for them in terms of how they’re using Doximity when they log in?

1. Doximity Builds A Doctor Platform

It started as LinkedIn for doctors. There was a little social networking, medical referrals, and job postings. Over time, they added technologies that are more integrated into doctors’ workflows. Now it’s a platform with capabilities similar to DocuSign, Zoom, Slack, a newsfeed like The New York Times, and increasingly, Scribe functionality and ChatGPT. We’re taking a bunch of household technologies and putting them on the platform.

To the investor, it would be like a Bloomberg or FactSet that you’re on all the time. To the advertiser, it’s more like Facebook, because doctors will tell you who they are: “I’m a radiologist in Milwaukee.” Then advertisers know exactly whom they’re targeting and can direct ads to the right place.

In terms of the business model itself, what does it look like in terms of subscription revenue? Is it primarily ad-based revenue? How do they approach that?

It’s primarily ad-based revenue. The idea is that we want to have the doctors and medical professionals on the platform as often as possible, giving us eyeballs and spending time on the platform. Then big pharma will advertise its drugs to prescribing doctors.

Makes sense. When you know where the fish are, you can fish in that pond. You mentioned that when they launched, it was a social network, primarily the LinkedIn for medical professionals. When was that, and what was the storyline for evolving over the years? How much history is there in this business?

The current CEO, Jeff, had a previous business, Epocrates. Epocrates helped doctors make decisions about prescriptions and patient safety while on the go, so it was a digital drug reference guide. It was founded in the late 1990s, as mobile phones were becoming a thing. It eventually went public and was ultimately sold to athenahealth.

He started Doximity in 2010 with a guy named Nate Gross and a woman named Sherry Buck. They were really focused on the intersection of technology and healthcare, and then they went public in 2021.

There’s a definite history in terms of the founder being around this space and probably understanding the pain points. It’s still somewhat of a youthful business, having been founded within the past 15 years, with a shorter public lifespan than that. In terms of competition in this space, what exists? Forget about LinkedIn. That’s going to be a different bucket and way more generalist. Do they have other competitors in the medical professional network space?

2. Doximity Unifies Point Solutions

There are competitors. When you think about how pharma companies are trying to reach doctors, historically it’s been banner ads, trying to chase doctors as consumers and trying to find them on Golf.com or other places. Pharma reps can be viewed as competitors: pharma reps going into hospitals and trying to educate doctors on recent studies or drugs that are coming out. There are a bunch of point solutions. There are telehealth providers and newsfeed providers.

What Doximity is doing is really taking a lot of those point solutions and putting them on a platform, so that the hospital or the doctors have one platform with all the services available to them.

When I think about doctors interacting with who is advertising to them, but also trying to take in information from the network itself, what does that look like? If I’m a doctor, can I do independent research on new medicine that’s out there? Is that something that’s offered, and how does that interact with the advertising? Obviously, you always have this balance between the information being fed to you, sponsored content, educational content, and all of that. I’d be curious to hear how they’ve approached that and found an effective balance.

Right now, they show 1 ad in every 11 news items. The business started as social networking, LinkedIn-like, and over time they added a newsfeed. Thousands of new pieces of information come out broadly across the healthcare space. Doximity basically uses machine learning to help filter out the news that’s relevant to you. You’re not sifting through thousands and thousands of articles that may or may not be relevant to your specific practice. They call it “cutting the scut.” It enables doctors to get through that stuff quickly.

Then the business evolved even further: now we have all these eyeballs reading their daily news. You get CME credits by reading these documents to maintain your licenses. That was the first step into the “workflow,” quote-unquote, and then they started adding workflow tools that help doctors’ productivity. Digital signing, HIPAA-compliant documents that can be signed and digitally faxed, and secure messaging. Doctors can’t just message other doctors using traditional text messages, so they implemented that.

The telehealth business is lowering the technology bar for patients, making it very easy for the doctor to call the patient. When you call that patient, you can select, “Hey, I want the caller ID to say this is the hospital calling,” so that the patient doesn’t necessarily have your cellphone number and can call you at all hours of the day. At the same time, the patient knows that it’s the hospital calling, and they’re dramatically more likely to pick up the phone. They’re very doctor-specific and unapologetically focused on the doctor first, maintaining their time and respecting their time.

These products that they come out with are very targeted at increasing doctor productivity.

It seems very logical to me that the doctor would be the highest-value target of an advertiser as well, so just keeping that customer happy and satisfied is particularly important from that side of the business perspective. Do they monetize any of those add-on solutions as they're rolling them out? Because it does feel like the DocuSign-esque, HIPAA-compliant productivity tools can make a material difference. They're going to increase the stickiness of using the platform, which is a net benefit to the advertising business. But I'm just curious if they've explored monetizing any of those add-on tools.

They'll sell enterprise agreements to hospital systems to get all the doctors on Dialer Pro, but doctors can use all the tools for free. If your system doesn't necessarily have an enterprise agreement, then doctors can use the tools for free, but most of the revenue comes from pharma advertising to the doctors, as opposed to the hospital systems.

What has the trend line looked like for advertising spend coming from pharma? I know it's always high, but I'm sure there's some cyclicality to it. Are there any secular trends in that ad bucket that are worth noting? Because it feels like the most obvious KPI here.

3. Pharma Advertising Goes Digital

The market grows about 5% to 7% per year. That's because there's a secular shift to digital from traditional sources of advertising. The healthcare industry is pretty far behind the rest of the economy in terms of how far we've gone digital, and it makes some sense. The healthcare industry, specifically pharma, has an army of salespeople who are going into hospitals, which a lot of industries just don't have.

The latest numbers I saw are that digital advertising has 75% penetration in most parts of the economy, and we're about half that in healthcare. There's a long runway of shift that needs to happen. It helps that you can identify the ROI. When you put a TV commercial on, you have no idea if that consumer saw the ad and then filled a prescription or not, but it's very clear: We target a group of doctors, and then we buy third-party data to see who's getting the prescriptions. Being able to see the ROI is driving that shift to digital. The rate at which pharma will move over is the governing factor there.

Meta and Google, obviously, have an eyeball thing going on there. They built quite impressive businesses on the back of that thesis alone—the ability to measure the ROI on your ad spend—so it certainly checks out. I was reading this negative investor report. During COVID, you obviously had all of those sales reps basically grounded and unable to visit hospitals. Therefore, there was this big need for Doximity. Was there anything noteworthy that came out of revenue from that time period, where naturally you would expect to see a big push into a channel like Doximity? Was there any hiccup or breaking of that trend as you emerged out? What did the revenue trajectory look like through that period of time?

Your instinct is right on. During COVID, this was an absolutely necessary tool. Coming out of COVID, it probably pushed some pharma into the digital channel maybe a little faster than they would have gone otherwise. I think it opened their eyes to the effectiveness. During COVID, hospitals were shut down and pharma reps weren't allowed to go in.

What we see now is an increasing number of doctors who are what's called no-see doctors, where they don't want you to bring them in a box of donuts and talk about their drugs anymore, or take the doctor out for a steak dinner. It's almost generational that that's not how people are being marketed to or prefer to be marketed to these days.

The medical sales profession is quite unique. Would you expect, in terms of that share shift over time—you mentioned it's still quite far behind most other industries, or the economy broadly, in terms of digital ads as a percentage of total—that the natural place where you see share gains coming from would be the medical sales profession? Is it split evenly between traditional linear advertising and print advertising? Where would you expect it to come from the most?

It's coming from a few different areas. There'll be fewer pharma reps going forward. Banner ads and print are more traditional sources. Increasingly, consumer advertising will be moving over.

There was an executive order to really clamp down on what needs to go into a TV commercial for pharmaceuticals advertised to the consumer. In essence, you need to add 30 seconds to the commercial and talk about all the risks. It sounds a lot less appealing after 30 seconds of all the things that could go wrong. The ROI or the attractiveness of that channel is decreasing with this executive order.

Pharma spends about $10 billion a year in direct-to-consumer marketing today. Direct-to-physician is about $7 billion. This is a pretty big shift in terms of where the dollars were going historically, both from within the HCP channel and now also stealing from other buckets.

You mentioned the numbers on the overall market growth being quite healthy, multiples of GDP growth. Have there been any periods of time where you've seen a material pullback, or would there be anything that could represent a threat to overall pharma ad spend that would be noteworthy to keep in the back of your mind?

The pharma companies are operating on an ROI basis as well. If there was discussion of tariffs, or a push to have U.S. consumers on fewer drugs, I'd say if the profitability of pharma takes a hit, then they will likely spend fewer dollars advertising for their drugs. If there are caps on prices, or whatever may drive lower profitability for pharma, that would flow through to advertising and, therefore, Doximity.

Before we get into the profitability metrics of Doximity, I'm curious if they have done anything as it relates to in-person events. This is somewhat of my media-community-audience brain going back into that world, but it's a common attachment to these types of businesses to have trade shows or things of that nature. Is that ever anything they've explored or noodled with—dipping their toes into the live space, event space, anything along those lines?

They don't do a whole lot of that, to my knowledge. They have a board of directors of doctors that they bring in once a year, and they get ideas from the doctors on what would be helpful to them and what would help productivity. I think that's a 36-hour meeting on an annual basis that is just brainstorming and throwing stuff against the wall. Doximity implements and gets a lot of ideas from that weekend excursion.

Always good to have design partners in the business. On the margin side of the equation, how does this stack up? It sounds very technology-based, so I would assume that there are some impressive numbers here, but can you just give us a snapshot of the margin profile of the business and whether that's materially changed over the years?

4. High Margins Fund Expansion

It is impressive. The gross margins are about 90%. EBITDA margins are 55%, and operating margins are 54%. They're just placing ads on their platform in front of the eyeballs, so as the eyeballs grow, the inventory grows. There's not a whole lot of expense required on their side to place that ad.

Because they're generating 55% EBITDA margins and 54% operating margins, they're able to recycle back into R&D without really disrupting the margin profile of the business. Because margins are so high, they're able to reinvest. And that also means that as the top line grows and they continue to take market share, and more dollars move into their world, the incremental margins are incredibly high, which also just fuels the growth.

Do they have much excess cash? I would assume, as you mentioned, they've been building out this suite of different productivity tools for doctors. That's going to be a high-ROI investment, I think, just to reduce churn. Do they have excess cash that would go back to shareholders, that they would use for M&A? How do they think about capital allocation more broadly once it goes beyond reinvesting in the business?

I think they have about $900 million in net cash today, so that's about $5 a share. They use that cash. They've been buying back stock the last few years, but also making acquisitions. They're making acquisitions to increase the engagement of the doctors on the platform and continue to give them new tools.

They recently bought an AI engine that is now going to be used for clinical reference. You're getting your news feed, then you're making phone calls and signing documents, and now you're going to be increasingly using the platform for medical reference, clinical reference, and also for scribing your appointments with your patient.

On the AI point, there are obvious ways that incumbents can adopt AI into their systems, and as it stands today, in November 2025, I would expect that most agentic AI is just a benefit to existing corporations more than a threat. But medicine and the medical field are a very interesting study here, because I think when people question where AI could have the biggest impact, it is in the medical profession. Maybe that's more on the research side of things, but how have they framed both the risk and the opportunity, and then how have you thought about this? Because you have to think about it both as a risk and as an opportunity as it relates to AI.

5. AI Extends The Growth Runway

Starting with the risks, if there are point solutions that have much better reference, or are giving you more succinct answers or direct-to-the-point answers, or are wildly better, then that's certainly a risk. Doximity has made their platform on technology that's good enough, and that almost makes it sound like it's not great. It doesn't necessarily need to be the number-one telehealth provider and the number-one transcriber.

As long as on the platform I can get it all in one place and it's effective, that proves to win the day. The exciting thing about this clinical reference tool is just the amount of time that doctors will now be spending on the platform—it goes up quite a bit. The scribe tool makes doctors incredibly happy because they're not spending their evenings writing reports or putting together charts. The AI can do that for them.

When you think about the secular growth or shift toward more digital, it seems very obvious to me in terms of being part of the upside case here. Are there other things that you would add to that, getting more of that wallet share onto the platform? Is there anything else that you would point to, or does it all revolve around that?

They're in the right place at the right time from a market-growth perspective as the industry moves digital. The wallet share is real. They have some charts in their investor presentation that show you the number of big brands—call them brands with over $100 million—over time, and the number of brands is increasing over time. Within that chart, you can see their wallet share of those big brands, and you can see how, over time, they went from 10% of the wallet share to more than 50%. You can see how that's shifting because of the ROI.

Other industries might move faster given the ROI that they're seeing, but it's just a lot more measured in pharma. They recently launched what they call the Portal, which gives pharma real-time feedback on how their ads are doing. That's just another way for them to gain wallet share, because as brands are seeing, “Oh, this ad is doing well, we're getting the scripts,” they can add on top of that. We talked about the CTV market moving in their direction, and then there are also new customers.

Increasingly, new biotech and new pharma customers are launching digital-first. They don't have an army of salespeople to begin with. They move to Doximity earlier in their maturation process than they have historically. If you want to dream the dream, they're currently largely just in pharma, but could theoretically move into medtech and diagnostic companies as well. They've got a lot of road in front of them—a lot of road to hoe with the pharma companies—so I think that's a little bit of an afterthought at the moment, but it certainly adds to the runway.

I still have this idea in the back of my head that even if it's a small dollar amount of subscription revenue that could come in, it is the very basic investor brain of subscription revenue and its attractiveness. In 5 years from now, if they were doing something that was subscription-based for doctors or their user base, would that be very surprising to you?

It wouldn't be surprising if they started charging the doctors, or really at the system level most likely, and I would guess it would be largely for the AI tools because they're adding so much value. The last thing that they want to do is upset doctors or give them a reason to leave the platform, because it's very doctor-centric, and they understand that keeping their engagement is probably the number-one KPI. So long as you don't give them a reason to lose engagement, that's probably the better way to lead.

6. What Could Break The Thesis

On the alternate side of the equation, just from a risk perspective, what would stand out the most to you in terms of a risk to this thesis playing out? What is most top of mind when you think about risks that could potentially play out?

Staying ahead of what the doctors want and need. You've got to be forward-looking on what is most important to saving them time and increasing productivity. If there's a misstep there, that could be a problem, and it could lead to lower doctor engagement on the platform. If there's a competitor that somehow steals all the eyeballs or starts to chip away at them, that's going to be the first sign of some slowdown or some potential competition that's going to impact the business.

I think they have 80% share of doctors—some crazy market-share numbers. Does it come up often where there's new competition entering the market, or are there some competitors making noise or showing some impact that's worth monitoring?

They're point solutions for the most part. There are constantly point solutions coming to the market, trying to garner attention from doctors. The platform is really the differentiator. Having all the point solutions in one place that's open all day long is the moat that keeps the point solutions from taking attention. If you have a point solution that is just far and away better than anything else, then maybe you use that outside the platform. What Doximity is doing is just trying to be good enough to keep you on there.

There's a bar in terms of how much better something needs to be in order to get you away from the one-stop shop. It's a unique business. There's not an obvious public company that perfectly matches what they do. So when you think about this from a valuation perspective, whether it's comps analysis or anything like that, how do you even approach thinking through a valuation framework when it sits in such a unique niche of the market?

7. Cash Flows Anchor Valuation

I think it always comes back to cash flows. Comps analysis is potentially interesting, but I look at the business on its own and look at the cash flows, the growth opportunity, and the moat around the business to try to assess: for this level of cash flow, this level of growth, and this expected duration of growth, what am I willing to pay for that? That's how I think through valuation.

A lot of the sell side will use price-to-sales multiples. I think price-to-sales multiples were invented for companies that had no earnings and cash flows, just as a way to get your arms around what could be. This business already has that. It's got great margins and great cash flows. 1% of revenues goes back into CapEx. I put a multiple on the cash flows, and based on how long I see this long secular shift happening and the rate of growth, there's a long secular shift, and then they're going to add share on top of that. I try to make an assessment of how much share they can take on top of the secular shift and put a multiple on the cash flows.

I can at least acknowledge a price-to-sales multiple on a business with nine percent gross margins, but when you have actual cash flow to use to approach it, that certainly makes sense. From a market perspective, with these niche businesses, you often will have dislocations. Does the market treat it like a software business? Do they treat it like an advertising business? Do you have any sense of how you think the market looks at Doximity and goes about valuing it?

I think it's traditionally covered by some software and some healthcare. In a way, people may think of it as ad tech, in the sense that they can report a great quarter, but people don't necessarily give them credit that that's going to continue in quarters forthcoming. I view it as the value proposition to the advertisers getting higher as engagement gets higher. That's leading to strength in the quarter and strength so far this year.

Because it's related to ad tech and the history of ad tech, people may be a little wary of giving credit for the duration of growth. I view it a little differently in that it's the platform that happens to monetize ad tech. So long as the platform is there with engagement, then we can feel comfortable that they'll be able to capitalize on this long runway ahead of them.

It makes sense from all sides of the spectrum in terms of where there might be a varying view. This has been fascinating. I got to learn more about a business that I was very interested in already. We close out the conversations with a key lesson that you might be able to pull away from this particular business and apply elsewhere. Is there anything that stands out from Doximity that you think is useful from a framework perspective, or just a broad lesson that you took away?

I think value proposition to a customer matters a lot. The doctor-centric nature of Doximity is not just something that they say; it's something that they do and care a lot about. When you can combine a high value proposition to the customer with a long runway, and throw in strong incremental margins on top of that, it's a recipe for rapidly increasing the earnings power of the business. When you get those things operating together, so long as they can maintain engagement on the platform in order to capitalize on that runway, things can get pretty good pretty quickly.

Well, thank you, Jim. I appreciate you joining us today and sharing your knowledge and educating me a little bit more on what I love.

It was a lot of fun. Thanks, Matt.