Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Apple Inc. (AAPL), Microsoft Corporation (MSFT),, Inc. (AMZN), Barnes & Noble (BKS): In-App Purchases on Barnes & Noble, Inc. (NYSE:BKS)’s Nook: Will It Matter?

On Monday, Barnes & Noble, Inc. (NYSE:BKS) subsidiary Nook Media announced that it will soon bring in-app purchasing functionality to the company’s Nook devices, thanks to a partnership with privately held mobile-payment provider Fortumo.

Wait, they didn’t already have that?
To be sure, for many folks who’ve never used a Nook tablet, in-app purchases seemed like a foregone conclusion for a serious device hoping to compete in today’s crowded market.

After all, both, Inc. (NASDAQ:AMZN)‘s Kindle Fire and Apple Inc. (NASDAQ:AAPL)‘s iPhones and iPads have long used in-app purchasing as a way to not only draw in new developers through the promise of additional revenue streams, but also to supplement their own coffers through profit sharing arrangements. As a reminder, Apple and, Inc. (NASDAQ:AMZN) get to keep 30% of every in-app sale from the devices running their respective platforms.

With this in mind, it’s no wonder Barnes & Noble, Inc. (NYSE:BKS) has struggled to turn a profit from its Nook division, even after the huge confidence booster in the form of a $300 million infusion from Microsoft Corporation (NASDAQ:MSFT), which helped form Nook Media in 2011.

In fact, the struggling bookseller fell more than 6% in a single day last month, when it reversed its previous assertion that Nook revenue would be at least $3 billion this year. As a result, Barnes & Noble, Inc. (NYSE:BKS) also stated that its 2013 EBITDA loss from the Nook business will probably exceed even the $262 million loss it suffered last year.

How much longer can they keep this up?
Then again, core sales in Barnes & Noble, Inc. (NYSE:BKS)’s retail business took some of the sting away by actually exceeding their expectations in the most recent quarter, contributing to a 7% year-over-year growth in EBITDA. What’s more, Nook media is still managing to finance itself and had around $240 million in cash remaining as of last month. In addition, Microsoft Corporation (NASDAQ:MSFT)’s stake in the new company also included $180 million in revenue-sharing payments over three years as well as $125 million to help finance the Nook’s international expansion.

Can this move effectively supplement Barnes & Noble, Inc. (NYSE:BKS)’s efforts to right the Nook’s wrongs and — most importantly — slow Nook Media’s cash burn long enough to help the segment actually turn a profit?

Foolish final thoughts
Color me skeptical, but I’m not particularly optimistic for Nook’s future prospects, especially given the fierce competition it faces from the superior product ecosystems at, Inc. (NASDAQ:AMZN) and Apple Inc. (NASDAQ:AAPL).

When the rubber hits the road, then, I’m still convinced it’s only a matter of time until Barnes & Noble runs out of gas.

The article In-App Purchases on Barnes & Noble’s Nook: Will It Matter? originally appeared on

Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool recommends, Inc. (NASDAQ:AMZN) and Apple and owns shares of, Apple, and Microsoft Corporation (NASDAQ:MSFT).

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.