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Blue Nile, WebMD Seeing Success With Mobile Apps

Posted on Thursday, Dec 23rd 2010

According to Forrester, online retail sales in the United States will increase 16% over the year to $52 billion this holiday season. In a survey of 4,700 U.S. online consumers surveyed for the report, 37%said they expect to make holiday purchases on the Web this year, compared with 30% in 2009. Mobile phones are also expected to play a bigger role this season, with 18% of U.S. online adults planning to use their mobile devices to compare prices and 16% to use their phones to locate a nearby store.Blue Nile’s Financials
Online jeweler Blue Nile (NASDAQ:NILE) is also hopeful of a better holiday season. They recently reported Q3 revenues of $67.5 million compared with $66.9 million a year ago. The market was expecting revenues of $72.1 million. EPS of $0.19 was a cent higher than the market’s estimated $0.18.

International sales contributed 14% to total sales and grew 5.7% over the year to $9.3 million driven by strong growth in Canada and Asia-Pacific. Sales were weaker in the U.K. and Europe due to economic concerns and weaker currencies compared to the U.S. dollar.

For the current quarter, Nile expects revenues to grow 3%–12% over the year to $106 million–$115 million. EPS for the quarter is projected at $0.4–1$0.46. Analysts were expecting revenues of $110 million and EPS of $0.43.

Blue Nile’s Mobile Expansion
Realizing the importance of mobile devices, Nile launched their iPhone app in September of this year. The app has been downloaded more than 100,000 times from over 90 countries since its launch. According to Nile, more than 25% of their website traffic now comes through smart phones, and mobile shoppers are spending 10% more on average this holiday than computer Web-based shoppers. Earlier last month, the iPhone app also recorded its biggest sale ever: someone bought a diamond engagement ring costing more than $250,000 using it.

The stock is trading at $59.60 with a market capitalization of $857 million. It touched a 52-week high of $65.48 in December last year.

WebMD’s Financials
Another online player, WebMD (NASDAQ:WBMD), saw Q3 revenues grow 21% over the year to $135.3 million. The Street was projecting revenues of $135.1 million for the quarter. EPS of $0.22 was in line with market expectations.

For the quarter, public portal advertising and sponsorship revenue grew 26% over the year to $113.1 million. Private portal services revenues were flat at $22.2 million for the quarter.

Traffic to the WebMD Health Network grew 41% over the year to reach an average of 83.3 million unique users per month. Total traffic of 1.8 billion page views during the third quarter increased 23% over the year. During the quarter, 1.5 million continuing medical education (CME) programs were completed on their network.

For the current quarter, WebMD expects revenues to increase by more than 20% over the year to exceed $165 million and net income to be more than 16% of revenues.  The market was expecting revenues of $165 million.

WebMD’s Mobile Initiatives
WebMD’s mobile application, launched earlier this year, is also seeing strong growth. Since their launch, the iPhone and iPad applications have been downloaded more than 3 million times. Earlier this quarter, WebMD launched a mobile version of the WebMD Health Record, which integrates the user’s individual health history into their core mobile application such as Symptom Checker, drug and treatment guides, and Physician Finder. The company is working on another app to be launched next year that will be able to deliver a fully personalized view of the health information and actions most closely related to the user’s health status.

The stock is trading at $50.75 with a market capitalization of $2.96 billion. It touched a 52-week high of $51.98 in August of this year.

Gartner estimates 4 billion mobile application downloads for 2010. The number is expected to cross 21 billion by 2013. And it is not just smartphones: Tablets too will grow significantly in the coming years. Gartner expects over 55 million tablets to be sold in 2011 from the current year’s estimated sales of 19.5 million units. By 2014, tablet sales will cross 208 million units. With mobile devices gaining in popularity, online players such as Nile and WebMD will have to improve analytics to optimize applications and improve the user experience by going beyond recording mere downloads and capturing other statistics such as active users to ensure that mobile becomes a steady source of revenues for their operations.

Another trend that they need to prepare for is the social Web, currently dominated by Facebook and Twitter. Both BlueNile and WebMD already have Facebook pages. The coming years will test their ability to leverage these social networks to drive business.

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