Mark Vadon, CEO of online jewelry retailer Blue Nile (ticker: NILE), discussed online advertising costs and marketing on his May 4th Q1 earnings conference call. Key quotes:
In addition to the rising price of diamonds, during the past 18 months we have seen significant increases in the price of internet advertising as well as very strong increases in the prices of platinum, gold, and silver. When you add up diamond, platinum, gold, silver, and internet advertising, they represent the vast majority of Blue Nile's cost.
Over time, the approach we've taken in acquiring new customers is simply… we don't acquire a new customer unless we believe we're going to make money on the first purchase. As advertising costs have risen… that effectively means… we pull back on some of our advertising vehicles. And so the growth revenue in referral and repeat is driving growth more than the acquisition of new customers.
…we were a little… too conservative in how we were marketing… our growth could have been a little better. When you look at marketing as a percentage of sales, traditionally we've been running around 4%. It will move around a little bit from quarter to quarter. But it's roughly 4% of sales. We came in below that in Q1. I would have like to have seen us be a little more aggressive in going after growth.
(Quotes are from the CCBN StreetEvents transcript.)