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Continuing my coverage of consumer internet companies and how they are adapting their business strategies to Web 3.0, here is an analysis of two very different players, WebMD (WBMD) and Blue Nile (NILE), who recently announced their results.

WebMD, the online medical services portal, has been delivering good results for the last few quarters. Q2 revenues grew 15% over the year to $89.2 million, narrowly exceeding the market’s expectations of $89.1 million. EPS grew to $0.11 from $0.09 the previous year. The market was expecting EPS of $0.10. (See earnings call transcript.)

By segment, Online Services grew 16% in the year to $84.6 million. During the period, Advertising and Sponsorship revenues increased 19% to $62.4 million and Private Portal Licensing revenues grew 10% to $21.9 million. Publishing and other services registered an increase of 5% over the year to $4.6 million.
WebMD reaffirmed their revenue expectations of $380-$395 million for the year.

In some of the other key metrics, the average number of unique users increased to 48.4 million per month with a total of 1.1 billion page views. During the quarter, the company exceeded 1.5 million monthly physician visits to their professional sites and recorded 1.3 million completed online continuing medical education [CME] programs.

Part of WebMD’s approach has been to tie up with strategic partners. Earlier in the year they partnered with Yahoo! to market a proprietary behaviorally targeted product that uses WebMD profiles for WebMD visitors when they are on Yahoo’s network. Late last year, they teamed with Medcenter to sell their online services in Latin America, Spain and Portugal.

They have taken that strategy one step further this quarter and tied up with GNC, the world’s largest specialty retailer of nutritional products, to create an “innovative online and in-store consumer program to increase the awareness and understanding of the importance of vitamins and supplements to improve overall health and wellness”. The partnership gives WebMD access to the users of both gnc.com and GNC’s 4,900 retail locations.

WebMD continues to launch innovative niche products for their users, including Physician Connect last quarter. This quarter they added Medscape Speaker Series to their list. The tool is a virtual physician seminar which incorporates key opinion leader video presentations and also has the facility of a live online Q&A and audience polling session. The addition is one way in which their Community feature just seems to be getting better each quarter.

The stock has been trading at $31.81 and gained 2.7% following the results announcement. I stand by my position of Buy for WebMD.
 
1yr WBMD
 
Online jeweler Blue Nile (NILE) does not seem to be having such a good spell.

Revenues were $73.7 million, a 2.2% increase over the year. However, the market was expecting revenues of $74.5 million. EPS for the quarter dropped by $0.03 to $0.20 for the quarter compared to the previous year. The Street was looking for EPS of $0.17. Total orders were down 7% compared with a year ago, and the average selling price per order increased 9.7% to $1,787 in the quarter.

Management cited growing economic pressures and rising raw material costs as the big reasons for worry. (See earnings call transcript.) Diamond prices increased from 7%-25% in June. Metal prices have also increased during the year: platinum was up 33%, gold 9%, and silver 17%. Further, there has been a substantial decrease in credit approvals to consumers, resulting in a significant decline in the company’s third-party financing program.

Blue Nile has been focusing on a three-pronged strategy of improving the customer experience, managing a lean cost structure and growing internationally to help improve their performance. They are enhancing the usability of and product navigation features on their website and improving their customer service training.

They recently launched a Diamond Alerts search functionality which alerts customers by email or RSS feed when the diamonds matching their search criteria have been added to the website. They also launched Live Help, which is a real-time chat with an expert diamond and jewelry consultant who can answer any questions that arise as customers shop on the site. Blue Nile is also planning to launch a feature where customers can design their own rings.

However, they are still not looking at improving the experience for repeat customers and working towards personalization as a major value proposition, although you could say designing your own rings is a brand of personalization.

Realizing the need to strengthen the non-engagement jewelry segment, they are now adding to their product base with newer styles and collections. They continue to drive international expansion and have already entered over 25 markets globally. During the quarter, international sales grew by 179% to $8.1 million compared with the 5% reduction in US sales.

For Q3, they are expecting revenues to grow 0%-5% over the year with net income of $0.15-$0.17 per diluted share. For the full year, they revised their expectations of revenue and EBITDA growth to mid-single digits.

During the quarter they repurchased $0.50 million worth of 10,500 shares.

The stock slipped $0.58 to close at $38.94 following the announcement of the results. Earlier last month, it had reached a new 52-week low of $33.76. It has recovered substantially and is now trading at $45.06.

1yr NILE
Source: WebMD, Blue Nile: Two Consumer Internet Plays