Despite Teladoc’s (NYSE: TDOC) rocky earnings reports, its mental health subsidiary BetterHelp has seen its number of active users skyrocket this year.
In March of 2022, BetterHelp had just under 200,000 active users; that number has risen to nearly 350,000, according to a chart from investment research firm Hedgeye. The number of downloads has also made a sharp increase, from roughly 25,000 downloads to 30,000 in that same time frame.
BetterHelp operates under a primarily direct-to-consumer model.
This comes amid Teladoc’s disappointing financial results, which it attributed in part to BetterHelp’s advertising costs associated with customer acquisition. In Q2 of this year, Teladoc reported growing revenue by 40% year over year.
Yet this performance came in at the low end of its expectations.
Even with BetterHelp’s increase in user activity and downloads, Hedgeye points out there are pervasive, long-term headlines that Teladoc must overcome. Active users and downloads for the Livongo and Teladoc platforms remain fairly stagnant, and there has been lackluster interest in the company’s Primary360 offering, according to Hedgeye.
“BetterHelp continues to ramp, but not as a solution for a mental health benefit,” Hedgeye said in the note. “We think labor cost pressures and customer churn are significant headwinds to margins even as app activity looks good.”
Founded in 2013, BetterHelp was acquired two years later by Teladoc for $4.5 million. The subsidiary now makes up roughly one-third of Teladoc’s total revenue. It posted a particularly strong 2021 earnings of $700 million in global revenue.
Yet recently, BetterHelp has reported slower-than-expected marketing yield rate. Teladoc CEO Jason Gorevic has blamed smaller digital health startups for BetterHelp’s disappointing advertising yield rate.
“We still see smaller private competitors pursuing what we believe are low or no-return customer acquisition strategies to establish market share,” Gorevic said in July. “Although we do not see this as sustainable, it’s difficult to predict how long this dynamic may continue.”
But changing market forces are leaving some analysts optimistic about the subsidiary’s future.
“Our analysis of website traffic indicates that BetterHelp is regaining share in recent months as Cerebral website traffic declines, albeit with overall [behavioral health] traffic still down, following scrutiny around Cerebral’s prescribing practices,” stated an analyst note from investment bank and financial services company Jefferies.
Overall, digital interest in mental health apps is on the decline. In fact, mental health app downloads have declined by more than 30% since January of 2021, according to apptopia.
Investors have also cooled on the technology. Funding into the digital behavioral health sector fell by 60% from Q4 2021 to Q1 2022, CBI Insights reports.
Hedgeye analysts did not immediately respond to an interview request from Behavioral Health Business.