Mark Vadon: We accept both Google Checkout and PayPal. Both of those are on our shopping cart. We just released PayPal probably less than a month ago, so it''s still very early there. But overall, we are trying to provide more options for our customers, and both of those are appealing to their own audience.

On the number of orders, overall we are seeing great growth in traffic to the website, but we don''t manage the business to a number of orders. We are managing the business more, we are looking at traffic coming into the website, and we are trying to monetize it as well as we can irregardless of how many orders it drives. Just as you look at our business, it''s relatively unique because of the range of price points. Our price points this quarter went from $35 up to our largest order was something like $190,000. So when you''ve got that range of price points, your average ticket can move around, just based on what types of traffic you are driving. Different marketing channels drive different mix. Things like what you put on an e-mail as it goes out, what you are featuring on the homepage, all of those things can move the mix.

We are trying to maximize the revenue generated from the traffic, and that can lead to a lower order, higher ASP type of quarter or the opposite. Truthfully, I never even look at that number of orders number until you guys bring it up. I''m a much more interested in, how much revenue are we driving out of this. The two numbers we are watching most closely to understand conversion are what''s the traffic inbound to the site. That was plus 20% this quarter, which was a great number. And then, how many dollars of gross margin we are generating per person we are driving onto the website and that is also doing quite well.

Jim Friedland (Cowen): First, on the international business, are there any cost of goods that are non-locally driven coming out of the UK, or are you buying diamonds in pounds and euros? In terms of the free overnight shipping across all the items, FedEx is raising their prices meaningfully. How should we think about gross margin in 2008 in terms of the various trends? Could FedEx price increase weigh on gross profit at all?

Diane Irvine: I think you are asking specifically about purchasing diamonds. Diamonds are denominated in dollars globally, and those sales are being reflected in dollars here. The only thing that would happen there, for example, in the UK a customer is buying in pounds and then we''ll be converting that into dollars. So you have a few days of different currency. At this point, that operation is a very small number in terms of any conversion impact from currency.

In terms of shipping, the priority overnight shipping we look at that as an investment in the customer experience. As you look at next year, what you would see more of is, as our mix shifts a little towards more non-engagement product which carries a higher gross margin percentage because it''s a lower ticket, you''d expect to see stable to possibly upward margin movements. We are doing a great job across the board in the company in terms of costs, whether it''s in our product purchasing or whether it''s in any of the other line items that go into cost of goods.

Mark Vadon: When you look at that free shipping, the priority overnight, our average ticket is so high that the shipping cost as a percentage of revenue is relatively minor. This is not a cost; it''s an investment that will pay out relatively quickly, because we are going to see the lift necessary to pay for that change in shipping. Overall, you start looking as we are shipping everything on priority overnight on FedEx, we are becoming a decent-sized customer for FedEx and we are seeing some leverage as we continue to ramp the business. Focusing all of our efforts and our buying power on one form of shipping helps us when we need to negotiate our pricing.

Jim Friedland (Cowen): Last quarter you said that you were in a position where you even experimented a little with raising prices. Can you talk a little bit about pricing trends on the site in engagement and non-engagement this quarter?

Diane Irvine: In terms of pricing, we are relatively stable, to use that term, where our pricing is driven by the price point of the product. So we are looking at the gross margin dollars as we can go up from a $35 product to something in the hundreds of thousands of dollars. For example, within diamonds where we might see certain pockets where prices either get raised or lowered during a quarter, but it''s not a structural change in our pricing. Then as you look at metal products, whether it''s something containing platinum or gold, over time as those prices have gone up, we might have periods when we are raising our prices by a bit, but nothing significant in terms of changes, just based upon supply and demand. We''ll make changes on a continuous basis.

Mark Vadon: You are seeing our margins creep up more from mix than anything. We are keeping relatively stable pricing within product lines, but then the mix is slowly shifting over time. I''d just say that in the third quarter, that''s when the mix is the most geared toward engagement of any time period during the year, that shift will be lightest. I think you should expect to continue to see gross margins edge up as the mix continues over the quarters and years to come.

Malindi Davies (CIBC World Markets): Could you elaborate on your top markets. Are they still growing at 20% plus, as you have said on previous calls? Do you see any difference in terms of engagement versus non-engagement split in those markets versus the rest of your markets?

Mark Vadon: Yes, we continue to see strong growth from our top markets. What we have been seeing for the entire history of the business is our most mature markets are growing slightly slower than the business at large. We keep watching those markets, and as long as those markets are showing healthy growth, we think that''s a forward indicator of the upside revenue potential of the business.

Our belief is eventually the whole country shops online the way people do today in markets like San Francisco or Northern Virginia or Boston or those types of markets. But we are seeing no change and we''re seeing those markets continue to grow. Those markets tend to have a little broader range of products in the mix. What we are seeing is there are more repeat buyers in those markets, and so the mix is a little geared towards the non-engagement. So those markets along with that have slightly higher gross margin levels. They look like as we would expect, the overall business to more and more look over the years as the rest of the country sort of matures in its purchasing behavior.

Jaime Sheinheit (Merrill Lynch): You have talked about significant strength in the higher-ticket items. Could you talk about the trends you are seeing in the lower-priced items?

Diane Irvine: Over time, we really find that the tails are growing. The high end is growing very nicely. We also see, as you look at price points that at the lower price points in engagement, that is growing as well. I think you are finding just a broader range overall in the business. That looks very healthy to us.

Jaime Sheinheit (Merrill Lynch): Could you expand a little more on how you are driving traffic to the international sites?

Diane Irvine: We may have talked in the past in terms of international. I''d say we are in the early stages of marketing there. We are doing online marketing search and just started an affiliate program. I''d say we have built a good business there albeit, at this point, a smaller one without doing a lot of marketing. We are doing more and more as we see the revenue build and we see the momentum there.

Mark Vadon: The marketing in those markets looks a lot like what the US Blue Nile marketing looked like in 1999. We have just layered in the very beginning of a marketing program. So there''s paid search happening, there''s natural search. There''s a lot of referral happening in those markets. We just introduced an affiliate program in the UK. I think what you''re going to see over the next year or so is we''re going to start launching a complete integrated marketing program, more similar to what we have in the US.

I think that''s one of the things we are most excited about. Even with limited marketing, those businesses are growing well. If you look at our UK and Canadian businesses combined, our belief is that combined business is larger in the sale of diamond engagement rings than any competitor we have in the United States. That points to competitively the lead we have on anybody is immense and is just getting stronger over time.

Kristine Koerber (JMP Securities): How should we look at inventory growth going forward, especially as the mix shift changes towards non-engagement jewelry? Any risks associated with that?