More Lies From Vonage?

The Vonage earnings report is out, and it's only bad news: A whopping loss of more than $74 million in the quarter, skyrocketing marketing expenses, and worsening customer churn. Despite that, the company had the gall to claim it's on...

August 1, 2006

1 Min Read
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The Vonage earnings report is out, and it's only bad news: A whopping loss of more than $74 million in the quarter, skyrocketing marketing expenses, and worsening customer churn. Despite that, the company had the gall to claim it's on the way to profits. Does anyone believe these people any more? Let's start off the the ugly numbers. Losses are up by 17%, to $74.1 million. Customer churn is up 9.5%. Marketing expenses are up a massive 50%. The revenue of $143.4 million was below market expectation.

Despite all this, the company claimed that it's headed for a profit, possibly as soon as the first quarter of 2008.

That's not going to happen. Expenses will continue to skyrocket, particularly marketing costs. The company is in the early stages of a death spiral, and requires massive amounts of marketing dollars to offset worsening churn, and to fight against cable company VoIP services, and free VoIP services such as Skype.

Here's another whopper from Vonage. When asked whether the increased competition from cable companies would harm Vonage, CEO Mike Snyder claimed, "Some of their marketing development benefits us because it accelerates the adoption of VoIP.

Nothing could be further from the truth. Comcast, the biggest cable-phone provider, does everything in its power not to mention the term VoIP. It figures that scares away customers. So instead, it calls its service digital voice. How does that help Vonage? Not at all.Vonage has only one business plan: Try and sign up as many subscribers as possible, then sell the company for its subscriber list. There's no long-term future for the company, and the most recent numbers prove it.

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