Teladoc Health Inc. (NYSE: TDOC), one of the most recognizable names in digital healthcare, is facing a challenging financial moment—and much of it ties back to the rising BetterHelp advertising cost. Despite strong performance metrics in other parts of the business, Teladoc’s Q2 2022 earnings highlighted that the growing expense of acquiring new customers for its mental health platform, BetterHelp, is weighing heavily on the company’s overall outlook.
BetterHelp, Teladoc’s direct-to-consumer digital mental health arm, delivered a 40% year-over-year revenue increase during the second quarter of 2022. Yet, even this solid growth came in at the low end of the company’s expectations. CEO Jason Gorevic was candid in explaining why: inflation, shifting consumer behavior, and—most notably—the increasing BetterHelp advertising cost. With consumer confidence reaching multi-decade lows, it’s become more difficult to attract and convert users, even as demand for mental health services remains high.
Teladoc’s total Q2 revenue hit $592.38 million, a 17.7% increase compared to the same period last year. The company exceeded Wall Street expectations by beating earnings per share and revenue projections, yet Gorevic cautioned that the second half of 2022 would likely fall near the lower end of guidance. A major contributing factor? The diminishing return on ad spend, particularly from BetterHelp. The company acknowledged that the BetterHelp advertising cost has been a major driver behind the lowered revenue outlook, making it harder to sustain aggressive growth.
Pulling Back on Spend: The Cost of Staying Competitive
In response to the poor advertising yield, Teladoc has begun to cut back significantly on its marketing efforts. “You’ll see we’re not going to go to zero on the advertising spend in the fourth quarter, but it is a significant reduction because of the greater expense per advertising impression,” said Gorevic. The BetterHelp advertising cost has grown to the point where it no longer delivers the same ROI it once did, prompting the company to pull back while reevaluating its approach.
Complicating matters is the presence of smaller digital health startups that Teladoc claims are using unsustainable acquisition strategies to gain market share. “We still see smaller private competitors pursuing what we believe are low or no-return customer acquisition strategies,” Gorevic said. These companies are driving up industry-wide ad costs while making it difficult for more established players to maintain efficient marketing funnels.
And yet, Teladoc isn’t giving up on BetterHelp. The platform now accounts for approximately one-third of Teladoc’s total revenues, and company leadership remains bullish about its potential. Despite current challenges, Teladoc is still guiding BetterHelp to deliver 35–40% growth for the full year. That said, such growth depends heavily on how efficiently the company can navigate the rising BetterHelp advertising cost in an increasingly saturated market.
Market Signals and a Glimmer of Optimism
A recent note from investment firm Jefferies acknowledged the challenges Teladoc is facing, specifically tying its reduced guidance to the lower yield on BetterHelp’s marketing spend. However, there’s also a bright spot. The note points out that BetterHelp may be regaining market share, especially as competitor Cerebral has seen a decline in website traffic following public scrutiny over its prescribing practices.
“Our analysis of website traffic indicates that BetterHelp is regaining share in recent months as Cerebral website traffic declines,” the note states. But it also comes with a warning: overall traffic in the digital behavioral health space remains flat, and the BetterHelp advertising cost may remain high even if share increases. For Teladoc, this means any growth BetterHelp experiences in the near term may still come at a significant financial cost.
What’s clear is that while Teladoc remains confident in its leadership position and scale advantage, it recognizes that the digital health market has changed. The days of cheap and effective customer acquisition may be behind us, at least for now. The company is adjusting by reallocating marketing dollars and shifting its focus toward sustainability over sheer speed of growth.
The Path Forward
BetterHelp remains central to Teladoc’s vision and financial future, but managing the ballooning BetterHelp advertising cost will be critical. As digital health competition intensifies and consumers grow more cost-conscious, companies that can maximize marketing efficiency without compromising growth will be the ones that thrive. For Teladoc, that means leveraging its brand strength, data, and infrastructure while resisting the pressure to outspend newer entrants in the space.
In total, Teladoc’s financial strategy for the coming quarters appears to be one of cautious recalibration. While BetterHelp continues to deliver meaningful revenue and market presence, the company acknowledges that the high BetterHelp advertising cost can no longer be absorbed without adjustments. Whether Teladoc’s pivot proves successful will largely depend on how effectively it can convert future ad spend into lasting customer relationships.
For now, the message from Teladoc is clear: growth remains the goal, but not at any cost—especially not at the current BetterHelp advertising cost levels that are reshaping how digital behavioral health companies compete and survive.
