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Comments made by eDiets.com (ticker: DIET) CEO David Humble on his company's 3Q04 earnings call now seem prescient. But they also set a clear yardstick for judging whether the company's Q4 results (which it reports Thursday morning before market open) are successful. Here's what he said, and a quick comment:

I believe the on-line fundamentals from convenience and lower cost will continue to tip the [dieting business] category our way. Like other on-line direct response and advertisers, we have seen higher on-line advertising prices significantly increase our cost to acquire subscribers. To counter this, we made several changes to the business over the past 6 months, and made significant progress towards resolving this problem.

And importantly, we made the progress without making structural changes to the business that could have impaired our growth. As an example, we increased the weekly revenue we receive from each new subscriber 35% over the last quarter, and we've reduced the cost to acquire that new subscriber by 13% over the last quarter.

While we do not know where on-line advertising prices are going the balance of this year and next year, we have a plan in place to become less dependent on on-line advertising. That plan is opening up new channels of distribution and we are making progress in this area. We expect to achieve the same ratio over time. To summarize, the business model is our number one priority and it's improving.

Quick comments:

  • Rising online ad prices (particularly pay-per-click ad prices) have been the bane of Internet companies that rely on online advertising revenue to generate growth. Humble's comments, made in October, now seem an astute prediction of a key challenge that many Internet companies faced in Q4.
  • At the same time, these comments set a clear yardstick of success for eDiets.com: can it control its customer acquisition costs (and reduce churn)?
  • eDiets.com announces Q4 earnings results Thursday morning before market open.
  • DIET currently has a market cap of about $92 million and an enterprise value of about $75 million.

(Conference call quotes are from the CCBN StreetEvents transcript; permission to reproduce explicitly granted in writing.)



Source: Will eDiets.com (DIET) meet its own goals, or will the stock get slimmed-down?