Mental health startups that spent the last few years advertising directly to consumers are shifting gears, thanks in part to inflation.
Companies that sell online therapy and meditation services say it no longer makes business sense to aggressively market to consumers via Instagram, Facebook, TikTok and podcasts. Instead, many are seeking large customers such as employers and health insurance companies and spending ad dollars more frugally.
“It’s high time for wholesalers over retailers,” said Tom Cassels, CEO of the advisory and consulting arm of Rock Health. “We’re seeing the volumes go down on the direct-to-consumer side and a number of companies have shifted focus to the enterprise. They’re taking advantage of employers that are beefing up their employee assistance programs.”
According to data compiled by advertising insights company Vivvix, digital health advertising spending may have already peaked. In the second quarter of 2022, Brightside, Calm, Cerebral, Lyra, Mindbloom, Modern Health, Nue Life, Talkspace and Teladoc Health’s BetterHelp spent around $40 million on digital advertising. That declined to $34 million during the third quarter and $31 million in the fourth.
Headspace and Cerebral, for instance, spent big on traditional advertising in 2022, splurging for spots during the Winter Olympics and the Super Bowl, respectively. Neither had aired an ad for the Super Bowl this year.
The last few quarters still saw far greater digital ad spending for mental health startups than at any point in 2020, but experts expect these numbers to continue falling this year. Inflation is squeezing consumers, and thus causing companies to reassess their strategies.
“Inflation creates a barrier to entry when you ask people to pay out of pocket,” Cassels said. “When you have people paying 6% to 8% more for food and gas than they did a year ago, something like [online mental health] is the kind of cost that people are going to cut first.”
Talkspace, Headspace shift to enterprise
The COVID-19 pandemic highlighted the demand for mental health care and patients’ willingness to use telehealth. Low interest rates in 2020 and 2021 facilitated companies such as Talkspace raising hundreds of millions of dollars from public markets and private investors.
Talkspace and its peers devoted portions of that capital to direct-to-consumer advertising campaign. According to Vivvix, Talkspace spent about $10.4 million on digital health advertising during the first quarter of 2021, $8.2 million in the second quarter and $9.6 million in the third. Over the course of 2022, ad expenditures dropped significantly: During the fourth quarter, Talkspace spent less than $5 million.