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With its sights set on keeping pace with rival WebMD Inc., health-related Web site publisher Waterfront Media Inc. of New York has raised its fourth and largest round of private financing, valued at $25 million.

Scale Venture Partners of Foster City, Calif., provided "the lion's share" of the new money, according to Waterfront chief executive Ben Wolin. The new funding builds on $12 million in prior investments, spread out over three rounds since the company's inception in 2002.

Waterfront publishes several consumer health-related sites, most notably Everydayhealth.com. The company's network attracts 9 million unique visitors each month, according to a July 2007 report from Media Metrix/Comscore.

The other new investor in the round, Foundation Capital of Menlo Park, Calif., took a smaller stake and did not receive a board seat. Prior investors following on included Rho Ventures and Time Warner Ventures, both of New York, BEV Capital of Stamford, Conn., and NeoCarta Ventures of San Francisco.

The deal values Waterfront at a significant premium compared with its Series C round in March 2006, according to Wolin. During the interim, Waterfront also raised $8 million in venture debt from Hercules Technology Growth Capital of Palo Alto, Calif.

Wolin said Waterfront was seeking deep-pocketed investors to help pursue acquisitions in preparation for an eventual public offering. He mentioned Scale's involvement with cellphone game developer Glu Mobile Inc. of San Mateo, Calif., and business optimization software maker Omniture Inc. of Orem, Utah, both of which have gone public since summer 2006, as evidence of the firm's success in guiding companies through the IPO process.

According to Scale managing director Sharon Wienbar, the firm has tracked Waterfront for a few years but held off on investing until the company demonstrated success with an advertising-driven revenue model. Waterfront's older network of sites was based on a subscription model; Wolin said the company now takes in revenue from both sources.

Wienbar said the targeted online advertising model is especially useful for pharmaceutical distributors, which are among Waterfront's primary advertisers. Drug companies often need to buy a lot of space in print publications in order to include a great deal of fine print, she said, while online banner advertisements can simply point toward that information elsewhere.

WebMD, which became a publicly traded company for the second time in fall 2005, made at least four acquisitions during 2006. It acquired decision support software maker Subimo LLC for $60 million in cash and stock in December, medical education and recruitment company Medsite Inc. for $41 million cash in September, risk assessment and education firm Summex Corp. for $30 million in June and medical reference information distributor eMedicine Inc. for $25.5 million in January.

Wolin said he expects further consolidation in the online health information industry, with WebMD and Waterfront emerging as the two largest companies in the sector. Another round of private capital could help Waterfront complete large acquisitions, he said, but at the moment the company has no plans to raise additional capital.

Neither Wienbar nor Wolin would say exactly when Waterfront might conduct a public offering, but both said an IPO is a realistic expectation. The company is "trending toward $50 million" in annual revenues, according to Wolin, while Wienbar said Waterfront could catch up to WebMD's $220 million in annual advertising revenues before long. Wolin added that Waterfront expects to be profitable during 2008.

Babak Yaghmaie in the New York office of Pillsbury Winthrop Shaw Pittman LLP represented Waterfront, while Fenwick & West LP advised Scale.

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