Gadgetell | Tech News, Reviews, and Interesting Things

Every Monday, Bryan Glanzberg contributes The Water Cooler, a column that bridges the gap between technology and business.

No, no, no. I am not going to break out into the Prince song and put on my best leopard skin outfit (save us all if I actually had to do that). Vonage is filing for an IPO; one of the pieces of news in the now noisy telephone and VOIP market. What is intriguing about this situation is that Vonage is one of the fastest growing VOIP companies. They more than tripled their subscriber base in 2005 which is leading to expansion and growth or is it?

“In the first nine months of 2005, Vonage lost $189.6 million against $170 million in sales. It cost the company $213 in marketing dollars to acquire every customer“up from $137 per subscriber the year before. That means, based on Vonage’s most popular, $24.99 monthly residential subscription, it would take roughly nine months to break even on marketing costs for each new subscriber

Not only does it cost that much to develop the relationship with the customer, but the profit per customer has declined from $31 to approximately $26. It will be very interesting to see where this IPO takes the company; we are no longer in the 1990’s folks, and although the market has been around its 5-year high, tech investors are still sore from the *insert obscene remark* they faced in the late 90’s to early 2000’s after the bubble burst.

Consistent revenue streams and above average returns are what attract long term investors. Many companies are looking for a quick and easy buck in order to sell their ideas, but by the time they raise the capital, it seems as if there ideas are obsolete I may be very wrong here, but time will tell.

Read [News.com]

• Marc Lefar from AT&T joins Vonage as new CEO
• Vonage continues to struggle, proves new customers are hard to find
• Vonage offers new Vonage Pro VoIP calling plan