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VOIP's $24,000 Question

Phil Harvey
11/1/2006
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5:00 PM –- From The Philter's Vonage Math file, here's a figure that makes me wonder if VOIP is really that great a bargain.

Vonage Holdings Corp. (NYSE: VG) added 205,000 new customers during the third quarter -- and spent $254 to acquire each new customer. The company is saying is that it spent $52 million in three months time, just trying to convince customers to sign up for its service.

Put another way, the company spends $24,000 an hour just trying to convince customers to sign up for its service. If VOIP were truly a bargain, doesn't it stand to reason folks would be beating down the doors to sign up (and Vonage wouldn't have to spend so much)?

— Phil Harvey, VOIPY Editor, Light Reading

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DCITDave
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DCITDave,
User Rank: Light Beer
12/5/2012 | 3:36:15 AM
re: VOIP's $24,000 Question
I recall it was in the high $20s.

ph
sfwriter
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sfwriter,
User Rank: Light Beer
12/5/2012 | 3:36:15 AM
re: VOIP's $24,000 Question
Any idea what the average revenue per subscriber is?

Pricing for Vonage services start at $14.99 per month for basic service. Even if a subscriber were to pay $24.99 per month for the Premium Unlimited service, it would take Vonage nearly a year to break even on the customer with its current acquisition costs.

If customers are churning away before Vonage can recoup that investment, that's a pretty big problem.
DCITDave
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DCITDave,
User Rank: Light Beer
12/5/2012 | 3:36:08 AM
re: VOIP's $24,000 Question
FYI -- 8x8, a Vonage competitor, says its customer acquisition costs are around $99, on average.
sfwriter
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sfwriter,
User Rank: Light Beer
12/5/2012 | 3:36:07 AM
re: VOIP's $24,000 Question
re: "8x8, a Vonage competitor, says its customer acquisition costs are around $99, on average."

That makes sense. When was the last time you saw an 8x8 TV commercial?

It's interesting that consumer VoIP providers are still competing largely on price rather than trying to create innovative features.
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