Roughly 65% of Americans are overweight, and more than 300,000 die from obesity every year. As for eDiets.com (NASDAQ:DIET), it thinks the Internet can be an effective way to help Americans get slimmer -- and healthier.
Well, it is also a good business for eDiets.com. In the third quarter, revenues increased 14% to $13.5 million. During this period, net income was $2.1 million, or $0.09 per diluted share, which was up from a loss of $1.4 million, or $0.07 per share, for the same period last year.
What makes eDiets.com different? The company wants to position itself as the authority on dieting. For example, it has enhanced its content (such as from the Harvard Health e-newsletter and Psychology Today). What's more, it offers a wide array of diet plans, such as the Glycemic Impact Diet, the New Mediterranean Diet, Atkins, Trim Kids, and so on.
The cost of customer acquisition has been soaring in the online world -- it's making companies like Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), and Yahoo! (NASDAQ:YHOO) rich -- but of course is increasing costs for companies like eDiets.com. And as it goes, the primary source of revenues for eDiets.com comes from premium subscriptions.
Consequently, eDiets.com has been trying to be more efficient with its advertising budget. For example, its advertising expense fell 13% to $11.4 million in the third quarter.
Then again, the company has little choice. There is only $7.7 million in the bank. Thus, while many other online companies are showing strong growth, eDiets.com is likely to be a laggard -- that is, unless it raises more money and gets more aggressive in getting more paid members.
eDiets.com is getting its customers by advertising on Google and other paid search areas. But these companies can also easily create their own diet offerings. The point here is that if Yahoo! thinks there is a big business in dieting, how hard would it be for the company to license quality content and generate advertising revenues from its large user base? That's something for eDiets.com and potential investors to contemplate.
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Fool contributor Tom Taulli does not own shares mentioned in this article.
