What's next for digital mental health companies' ad dollars

​​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.

Talkspace Chief Marketing Officer Katelyn Watson said the shrinking consumer advertising budget derives from the company’s push towards profitability. In addition, Talkspace doesn’t have to spend as much on advertising because it’s in more health insurance provider networks than it was two years ago, she said.

“You’ll hear in some of our new ads that we're launching on podcasts and on our digital channels, they have a different tone,” Watson said. “It’s about how much you can pay as your copay with Talkspace and that we take insurance.”

Headspace Health, born of a $3 billion merger between Headspace and Ginger in 2021, aims to have 70% of its revenues come from enterprise customers in the near future, CEO Russell Glass said in November. Revenue currently is split evenly between enterprise and individual customers.

Christine Hsu Evans, Headspace Health’s chief marketing officer, said that having employers and health plans cover digital mental health improves access because patients aren’t paying the full cost out of pocket. The company’s strides in the consumer market will attract attention from employers, which are looking to offer more mental health benefits, she said.

Likewise, Teladoc Health scaled back its digital advertising. The company spent $24 million in the third quarter of 2022 and $21 million in the fourth quarter, according to Vivvix. “We are focused on making sure that we're optimizing our ad spend,” Teladoc CEO Jason Gorevic said in September. Teladoc Health did not comment for this article.

Cerebral, a mental health startup embroiled in controversy, reduced digital advertising expenditures from nearly $12 million in the first and second quarters of 2022 to $2.1 million in the fourth quarter. The company spent less on direct-to-consumer advertising to achieve sustainable growth, a spokesperson wrote in an email.

Apple changes the privacy rules

But finding more enterprise customers is not the only reason for the shift in advertising. Apple modified its privacy settings in 2021 in a way that blunted the effectiveness of certain ads, especially on Meta’s Facebook and Instagram, Hsu Evans said. Advertisers consequently were less able to track user activity, target their marketing and pay ad service providers based on performance, she said.

“We’ve spent a decade optimizing our marketing spend around data-driven models and, lo and behold, marketing spend in that way is not as efficient,” Hsu Evans said.

What’s next?

Mental health providers and researchers say the market reset is a good time to examine the effectiveness of digital offerings, particularly because they’ve advertised to younger people on social media platforms.

“I'm happy that people are getting the support that they need, and I think some people really do benefit from therapy apps,” said Dr. Michael Birnbaum, assistant professor at Northwell Health’s Institute of Behavioral Science in Manhasset, New York. “The concern that I have is some of these apps are offering things that haven't been proven, studied or known to be effective.”

Mental health startups need to be more transparent about how they target and treat customers based on their specific needs, said Julie Kolzet, a New York-based clinical psychologist. “Effectiveness trials are necessary to determine what works on what conditions,” she said. “Measuring results in the digital health services space can be difficult, and not everyone's going to have access to the results.”

The federal government is taking notice. A bipartisan group of senators wrote Cerebral and other companies this month expressing concerns about their advertising and data-sharing practices. And the Federal Trade Commission is cracking down on how digital health companies share data with third parties, and that could reach into the mental health space.

Despite these concerns, demand for mental health care remains high. Seventy-seven percent of counties severe shortages of behavioral health professionals, according to the National Council of Behavioral Health, a trade group for providers.

Telehealth is a means to bridge that gap. “Technology and psychiatry go hand in hand, and they will continue to go hand in hand. And mental health would benefit from a transformation,” Birnbaum said. “The challenge moving forward is determining exactly how we use it, for whom and when.”

This story first appeared in Digital Health Business & Technology.