The digital health boom, once driven by pandemic-era urgency and enthusiastic venture capital, is beginning to show growing pains. This is especially evident in Teladoc Health’s Q1 2022 earnings, which fell short of expectations and caused a market-wide reaction. A key factor was the rising BetterHelp advertising costs, which hindered the performance of Teladoc’s once-promising mental health subsidiary. BetterHelp struggled to maintain momentum amid ballooning ad expenses and stiff competition from venture-backed upstarts.
The Teladoc BetterHelp Q1 2022 earnings miss—and the more than 40% overnight stock price drop that followed—is more than a blip. It offers a window into how unsustainable market forces, aggressive customer acquisition strategies, and ethical gray zones are reshaping the digital mental health ecosystem.
A Staggering Fall: Teladoc Misses the Mark
In its first-quarter report, Teladoc announced $565.4 million in revenue, a figure that undercut expectations by $3.23 million. While the revenue miss may seem relatively minor, the larger implications were enough to trigger an investor exodus. Teladoc’s stock price plummeted by more than 40% in the hours following the earnings call.
The main culprit? Teladoc CEO Jason Gorevic pointed directly at BetterHelp, the company’s direct-to-consumer therapy platform acquired for a modest $4.5 million in 2015. Despite pulling in a remarkable $700 million in global revenue in 2021, BetterHelp’s Q1 2022 performance came in below expectations. The reason, Gorevic said, stemmed largely from rising BetterHelp advertising costs and a hyper-competitive digital therapy marketplace.
BetterHelp Advertising Costs: The Arms Race in Mental Health Marketing
During the earnings call, Gorevic identified a troubling industry trend: soaring paid advertising costs. These costs, he said, were largely driven by smaller, venture-backed digital behavioral health startups that had “recently been well funded” and were making what he called economically irrational decisions.
Many of these new entrants are burning venture capital cash to flood paid search and social media channels—outbidding larger, more established players like BetterHelp for visibility and traffic.
For Teladoc, the effect was direct and painful. BetterHelp advertising costs rose sharply, making it more expensive to acquire each new customer. With a direct-to-consumer model built on performance marketing, this created a drag on profitability and slowed overall growth. Gorevic noted that this pressure had not been anticipated in the company’s original 2022 guidance, prompting a downward revision of future expectations.
In all, Teladoc’s leadership emphasized that the surge in BetterHelp advertising costs was one of the most significant factors eroding their mental health segment’s margin contribution.
VCs Are Fueling the Fire
It’s not difficult to trace the source of the inflation in BetterHelp advertising costs. Startups in the digital mental health space raised over $5 billion in venture capital in 2021 alone. Players like Cerebral, Brightside, Talkiatry, and Done Health are leveraging this funding to build brand recognition quickly—even if that means absorbing steep marketing expenses.
These newer players don’t necessarily need to show profitability in the short term. Their goal is growth, which often means aggressively bidding on paid keywords, saturating social media, and offering low-cost trial sessions to hook users. This has had a cascading effect: even long-standing industry leaders like BetterHelp must now spend significantly more just to maintain their place in the market.
This upward spiral in BetterHelp advertising costs is a textbook example of what happens when venture capital collides with a direct-to-consumer health service.
Controlled Substance Prescribing: Another Ethical Divide
Another factor contributing to the struggles outlined in the Teladoc BetterHelp Q1 2022 report is BetterHelp’s refusal to engage in the prescription of controlled substances via telehealth—a tactic used by some competitors to boost patient volume and retention.
Gorevic addressed this head-on, noting that BetterHelp does not and will not prescribe medications like Adderall or Xanax, even though some digital startups have capitalized on temporary regulatory loopholes that allow remote prescribing during the public health emergency. This has put BetterHelp at a short-term competitive disadvantage, he said, though Teladoc stands by its decision as a matter of clinical ethics and long-term strategy.
He referenced a Wall Street Journal story that revealed how clinicians from companies like Cerebral and Done Health had their prescriptions blocked by major chains including Walmart and CVS. These actions have already triggered federal investigations and further scrutiny into these startups’ business practices.
While these practices may have helped those competitors reduce churn and attract patients faster, they also risk creating regulatory backlash—a risk Teladoc is unwilling to take.
Chronic Care Stumbles Too: Dual-Segment Setback
The Teladoc BetterHelp Q1 2022 report wasn’t solely weighed down by BetterHelp. Teladoc’s chronic care segment also experienced sluggish growth, missing pipeline projections due to two main obstacles:
- Benefit managers preoccupied with COVID-19 logistics—especially return-to-work strategies.
- Large-scale health plan clients whose decision-making cycles are longer and more complex than anticipated.
These delays further dented Teladoc’s overall Q1 performance and contributed to the revised 2022 forecast.
The takeaway is clear: even beyond behavioral health, securing and closing deals in a post-pandemic landscape is more difficult than ever. Between shifting employer priorities and unpredictable timelines from large insurers, Teladoc finds itself stuck in longer sales cycles that further compound financial pressures.
The High Price of Scale in Behavioral Health
The Teladoc BetterHelp Q1 2022 earnings reveal a hard truth: scaling behavioral health profitably is far harder than most investors realized. Unlike SaaS or retail tech models, mental health care is labor-intensive and highly regulated. Therapists are a finite resource, and user churn is high, especially in subscription-based therapy models.
Combine this with rising BetterHelp advertising costs, and the path to sustainable margins narrows even further. Customer acquisition is no longer cheap, and it’s increasingly difficult to retain users long enough to justify that expense.
These challenges aren’t unique to BetterHelp—they’re structural across the entire sector. But BetterHelp’s visibility and history make it a bellwether for how these dynamics will impact digital mental health over time.
Traditional Telehealth Providers Under Pressure
Teladoc isn’t alone in feeling the heat. Amwell, another publicly traded telehealth company, reported a $41.1 million EBITDA loss and projected continued losses into 2022. Like Teladoc, Amwell has invested heavily in mental health—specifically through its acquisition of SilverCloud Health.
These parallel narratives suggest that traditional telehealth firms are facing an uphill battle against smaller, VC-powered competitors. Their larger infrastructures, public accountability, and compliance obligations make it harder to pivot quickly or match the short-term tactics used by startups.
For Teladoc, this means defending its market share without compromising the very principles that make it a trusted healthcare brand. That’s a difficult needle to thread, especially when BetterHelp advertising costs continue to escalate and margins thin out.
Long-Term Strategy: A Sustainable Future or Market Concession?
Despite the tough quarter, Gorevic made clear that Teladoc is playing the long game. He emphasized the company’s commitment to ethical practices, clinical excellence, and sustainable profitability—rather than racing to match competitors’ marketing spend or adopting risky prescribing models.
“We’re going to continue to focus on running a long-term profitable growth business,” Gorevic stated. That may mean absorbing some short-term hits. But it also signals confidence that the BetterHelp advertising cost explosion and unsustainable startup tactics will eventually taper off.
Should regulatory scrutiny increase, or should funding dry up for some of these high-burn competitors, Teladoc may emerge with a cleaner reputation and a more durable business model.
What the Teladoc BetterHelp Q1 2022 Report Tells Us About the Industry
This quarter’s report offers a key set of takeaways not just for investors, but for everyone tracking the future of digital mental health:
- BetterHelp advertising costs are emblematic of a broader crisis in customer acquisition—one driven by unsustainable startup spending.
- Ethical divides—particularly around prescribing controlled substances—are creating temporary market advantages that may not hold up long-term.
- Large, compliant telehealth providers are now facing headwinds that challenge their very scale advantages.
- Behavioral health, while in demand, remains a tough business to run profitably at scale.
- Regulatory tightening could dramatically shift the landscape in the next 12–24 months.
Final Thoughts: The Reckoning Is Here
The Teladoc BetterHelp Q1 2022 results may mark the start of a wider reckoning in digital mental health. In many ways, it resembles a tech correction—a phase where only the most resilient models will survive, and where unsustainable tactics will be punished by regulators, users, or both.
Teladoc may have taken a beating in the short term, but its stance on ethics, quality, and sustainability may prove valuable in the long run. The question is whether the company—and the market—have the patience to see that strategy through.
As BetterHelp advertising costs remain elevated, and as startups continue to drive short-term disruption, Teladoc will need to balance defense and innovation carefully. The next few quarters will tell us whether they can weather the storm—or whether the digital behavioral health wave has peaked.
