Unlike its virtual health competitors, Teladoc’s (NYSE: TDOC) subsidiary BetterHelp plans to focus on the direct-to-consumer marketplace.

This tactic differs from its main competitor Talkspace (NASDAQ: TALK), which has refocused its efforts over the last two years on moving away from the direct-to-consumer market and towards more enterprise efforts. Others in the virtual care space, including Headspace Health, have also prioritized B2B efforts.

“BetterHelp right now still has room to grow on the direct-to-consumer side,” Mala Murthy, Teladoc’s CFO, said during TD Cowen’s Annual Health Care Conference on Monday. “We have scale. I would expect us to continue to grow and drive efficient returns and cash flows for that business. We don’t have any immediate plans, like a number of our much smaller competitors have done in recent times, [to] pivot away from B2C to B2B because they weren’t able to get to scale as they competed with BetterHelp.”

Teladoc has discussed integrating its direct-to-consumer capabilities into its B2B segment in the past. During the Annual J.P. Morgan Healthcare Conference Teladoc’s CEO Jason Gorevic noted that the company is selling BetterHelp to employers and expects to see more opportunities to do that. 

Murthy said the company is looking for all synergies between Teladoc’s B2B business and its D2C business.

“BetterHelp has done an incredible job in mining data, A.I., machine learning and large language modeling, as we think about matching consumers with therapists,” Murthy said. “Those are things that we absolutely are leveraging on the B2B side of the house as well.”

Murthy noted that Teladoc does have a substantial B2B mental health offering within its Teladoc Health brands. BetterHelp and Teladoc’s mental health offering has two separate pools of therapists, and the licensing requirements differ.

BetterHelp ends hyper-growth

After years of hyper growth the BetterHelp business is beginning to even out. Teladoc executives project a 3% to 6% reduction in revenue for BetterHelp in Q1 2024 and flat revenue for the whole of 2024.

“If I step back and take a look at BetterHelp today, it is by far the largest scale player in the direct consumer virtual mental healthcare space,” Murthy said. “It has been in hyper-growth mode for the last few years. Just a few short years ago–maybe three or four years ago–it was less than $100 million in revenue. It’s $1 billion in [annual] revenue.”

Since BetterHelp is a direct-to-consumer business, it is more susceptible to macroeconomic trends. Murthy noted that the BetterHelp business has never experienced a true recession, which makes it hard to predict how market turbulence could impact it.

“If consumers are feeling pinched in their wallets, there might be some reluctance to spend the $200 to $300 that they spend on this product,” Murthy said. On the other hand, a tailwind could be that in a recession, to the extent that they are losing employer-sponsored coverage, they are willing to pay cash out of pocket for a BetterHelp product, which is cheaper than brick-and-mortar therapy.”

While BetterHelp is pulling back a bit on its growth trajectory, it has previously discussed international sales as a key priority. The global market accounts for about 15% of BetterHelp’s revenue.

The organization plans to start by expanding into markets it has already penetrated, including Canada, the U.K. and Australia. However, Murthy said that the company is looking to expand beyond these markets in the future.

“Over time, we will test and learn our way into additional markets. Mental health is a global problem. It’s not a problem in just the U.S. or English-speaking countries,” Murthy said. “So to the extent that we find other markets where we have an efficient deployment, we certainly are looking to expand into other markets. From an economic standpoint, what I would say is based on our experience in the markets we are in, the return on investment is very similar … to the U.S.”