After acquiring Livongo, Teladoc's platform will now include virtual urgent care, virtual behavioral health solutions and Livongo's data science-driven chronic disease management solution all in one place. The merger will bring Teladoc a broader breadth of offerings to enable significant cross selling opportunities. Some people started to realize the power of Teladoc and worried that standalone telemedicine payers will eventually exit the market. However, others think that the Teladoc deal will likely increase acquisition activity in the digital and virtual care space as other telehealth companies will look to implement similar strategies to broaden their capabilities.
The announcement of Teladoc’s acquisition dragged TDOC down by 19% while some other public telehealth companies’ stocks, such as CloudMD and DarioHealth, went up significantly.
Yes, the acquisition made other telehealth companies more challenging to compete with Teladoc. However, here are some reasons why market leaders believe that smaller companies in the market have a bright future:
Teladoc has not turn profitable yet regardless of surging numbers of subscribers.
Teladoc has a problematic cost structure - selling, general, and administrative (SG&A) to trailing-12-month (TTM) revenue ratio is 55%. Its high selling and marketing expenses do not bring in ideal sales compared to many competitors.
Teladoc spends excessive amounts of money on branding themselves. At the same time, it helps the entire telehealth industry become more recognizable. Now consumers are becoming accustomed to accessing healthcare via different telehealth platforms.
In my opinion, small telehealth companies should focus on niche markets and make themselves a necessity for their clients. Investors want to see solutions in the public markets. Whoever is looking into the digital health space should be interested in seeing how small companies are disrupting the market.
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