Tuesday, January 08, 2008

MyVonage to add revenue?

Ike Elliot writes about Vonage's burn rate:

In Vonage's 3rd quarter earnings report, they reported a $206 cost per gross subscriber line addition, and a churn rate of 3% per month. Simply put, Vonage has to grow their subscriber base by 3% every month, or about 75,000 subscribers, just to avoid shrinking. And, it costs Vonage $15.45M to add these replacement subscribers. That $15M in monthly "treading water money" is a big contributor to the company's $120M/quarter cash burn rate.

All this after paying out $240M upfront to settle patent lawsuits. (There's still the issue of royalty payments that will cut into their "profit" - if they had any). In addition, Vonage still faces stockholder lawsuits stemming from the IPO.

Vonage rolled out a gadget dubbed MyVonage.

"The gadget is designed to assist with basic troubleshooting and serve as a hub for features, such as tracking the duration of calls, that were previously accessible only through Vonage's Web site. The $80 gadget, available to new customers for $10 with a one-year commitment, will be sold on Vonage's Web site starting Jan. 9 and in stores by midyear." [businessweek]

MyVonage is a customer service tool and supposedly a retention tool. I don't know how you charge your customers - especially Vonage's cutrate customers - money to make them support themselves. Start helping Vonage customers port their numbers now.

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