Talkspace CEO: Customer acquisition costs ‘irrelevant’ to where business is going

Virtual mental health company Talkspace has deprioritized its direct-to-consumer efforts as it doubles down on its B2B division.

After facing economic woes in the public market, the New York-based company is turning directly to employer, employee-assistance programs and contracts for its future. At the JP Morgan Healthcare Conference, Talkspace CEO Jon Cohen noted that the company covers more than 86 million people – and that number is growing as it adds new B2B deals and as its paying partners add new lives.

“It’s our diversified revenue stream, going across multiple channels,” Cohen said. “We have a very, very strong commercial pipeline, with established relationships with national payers and a large number of large and small employers.”

The new strategy will also reduce customer acquisition costs typically associated with direct-to-consumer businesses. Talkspace reduced its marketing spend by 30.5% in the third quarter compared to the previous year. In the first three quarters of 2022, the company reported that marketing costs fell by 22%.

Several digital behavioral health companies have noted that the increase in new mental health startups has caused the cost of acquiring customers for their D2C business to rise.

“I tell people, ‘stop asking me about customer acquisition costs, because that’s irrelevant to where we’re going in our business.’ Our job is on the enterprise side and getting people covered by payers,” Cohen said. “So it’s no longer like, how are you going to measure how much money we spend on advertising because we want a B2C model — that’s done. It’s gone.”

Although the company is moving away from direct-to-consumer acquisitions, Cohen said it will increase its efforts around brand recognition. This could help people who have access to Talkspace through their health plan or employer understand their product coverage.

“Our really big initiative right now is … our target marketing strategy, to let people know that this benefit exists for them,” Cohen said. “Once we capture that patient, what happens is they have a certain number of sessions that they want to be able to use, we have to make sure we increase utilization.”

Changes to Talkspace

Talkspace had a rough year. It was worth about $1.4 billion when it went public in June 2021. The IPO gave Talkspace $250 million in working capital. In the third quarter of 2022, its market capitalization was $121 million.

As a result, Talkspace has made a number of changes over the past year. For starters, he named Cohen CEO in November. He took over from Chairman of the Board Doug Braunstein, who served as interim CEO for about a year.

In November, the virtual care company also announced it was laying off staff at the start of the fourth quarter as part of its efficiency drive. It is not specified how many jobs will be eliminated.

Late last year, Nasdaq sent Talkspace a letter stating that the company’s share price had been below the required minimum of $1.00 per share for the past 30 days. The company has until May 17, 2023 to restore compliance.

But an acquisition could be one exit option for the struggling company. Over the past year, reports have circulated that telehealth giant Amwell (NYSE: AMWL ) is interested in acquiring Talkspace. The latest reports say that Amwell has offered to buy the company for $1.50 per share. As of January 13, the stock is $0.74.

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