Vonage: More Bad News

Criticizing Vonage feels like kicking a dog. Yet, what else am I supposed to do looking at the Web-calling outfit's third-quarter results? The company's churn is up, customer acquisition costs are up, lifetime value per supbscriber is down. That's very troubling.
Olga Kharif

After a while, criticizing Vonage feels like kicking a defenseless dog. Alas, Vonage just reported its third-quarter numbers, and while the Street louded a narrower-than-expected loss, I see plenty to worry about in the results.

The company suffered from higher churn and lower-than-expected subscriber growth. I bet that Vonage's decision to make its subscribers-IPO investors pay up didn't help the company make any friends (And, by the way, the stock is 60% off its IPO highs.) Vonage's execs also admitted faults with the company's ad campaign.

What I found most worrisome, however, was that the Web-calling company's customers acquisition costs, already high, have creeped up. In the second quarter, Vonage spent $239 to acquire a new user. In the third quarter, that number shot up by $15. At the same time, the number of months a customer stays with Vonage has declined due to increased competition in the Web-calling market, bringing its total lifetime value per customer down by $10, to $324 as compared to $334 in the second quarter, per UBS estimates.

If these trends continue, I don't see how Vonage is ever going to make money. I'd say, Vonage needs to take radical steps, now.

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