Virtual mental health company Talkspace (Nasdaq: TALK) has deprioritized its direct-to-consumer efforts as it doubles down on its B2B efforts.
After facing economic headwinds on the public market, the New York-based company is turning to direct-to-employer, employee-assistant programs and payer contracts for its future. The company covers over 86 million people. That number is growing as it adds new B2B contracts and as its payer partners add new lives, Talkspace CEO Jon Cohen said the 2023 J.P. Morgan Healthcare Conference.
“That is our diversified revenue stream, which is across multiple channels,” Cohen said. “We have a very, very strong commercial pipeline, with established relationships with national payers and a huge number of both large and small employers.”
The new strategy will also cut customer acquisition costs that were typically associated with its direct-to-consumer business. Talkspace reduced its marketing spend by 30.5% year-over-year in the third quarter. In the first three quarters of 2022 the company reported that marketing costs were down 22%.
Several digital behavioral health companies have noted the increase in new mental health startups has caused customer acquisition costs to rise for its D2C business.
“I say to people, ‘stop asking me about customer acquisition costs, because it’s irrelevant to where we’re going in our business.’ Our business is on the enterprise side, and getting people to be covered by the payers,” Cohen said. “So it’s no longer like, how are you going to measure how much money we’re spending on advertising because we want a B2C model–that’s done. It’s gone.”
While the company is moving away from direct to consumer acquisition, Cohen said that it will bolster its efforts around brand recognition. This could help people that have access to Talkspace through their health benefit plan or employer understand their coverage of the product.
“A really big initiative of ours right now is … our strategy for targeted marketing, to let people know that this benefit exists for them,” Cohen said. “Once we capture that patient, then what happens is they have a certain number of sessions that they want to be able to use, we need to make sure that we increase utilization.”
Changes for Talkspace
Talkspace has had a rocky year. It was worth about $1.4 billion when it went public in June 2021. The IPO gave Talkspace $250 million in working capital. As of Q3 2022 its market capitalization was $121 million.
As a result, Talkspace has made a number of changes over the last year. For starters, it named Cohen CEO in November. He took over for Board Chair Doug Braunstein, who held the CEO role on an interim basis for roughly a year.
In November the virtual care company also announced that it was laying off staff at the beginning of Q4 as part of its efficiency efforts. It did not specify how many jobs would be cut.
Late last year Nasdaq sent Talkspace a letter noting that the company’s stock price was below the $1.00 per share minimum needed for the last 30 days. The company has until May 17, 2023, to regain compliance.
But an acquisition could be one exit option for the struggling company. Over the last year reports have circulated that telehealth giant Amwell (NYSE: AMWL) is interested in acquiring Talkspace. The most recent reports have said that Amwell has offered to buy the company for $1.50 per share. As of Jan. 13 the stock is $0.74.
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