Wednesday, August 20, 2008

So You Want to be in Consumer VOIP

As consumer broadband sales plateau, ISP's have to look for greener pastures. For some that means VoIP, but if you look at Vonage and Packet8, you have to wonder if its worth chasing. Packet8 re-focused its vision on Business VoIP, where the ARPU is higher. When your ARPU is $250, you can afford to higher someone to sell it. When you are diving to the bottom, how you do pay for customer acquisition costs (or costs of sales and goods)?

"The largest player in the space, Vonage, is spending $65M per quarter just to keep their subscriber base from shrinking."

As I tell clients all the time, you are not selling to everyone unless you can spend more than $1M on a marketing campaign. Focus your marketing to your best possible prospects. Test a product. Selling to Verticals and Niches is easier.

But back to the consumer VoIP market. If you own the network like cable or ILEC, it is easier to market VOIP because you have captured clients and can maintain quality. If you resell network, it gets tougher. But let's look at a case. Let's say you have 300 broadband subs who you have spent 5 years cultivating, acquiring, and retaining. At best you will be able to sell another service to 20% of them. That's 60 people.

Do you really want to roll out an Asterisk box and maintain it for 60 customers? I still hear complaints about what a bitch it is to run email servers and spam. Voice is twice as challenging - to say the least.

While the second service sale will reduce churn, you have to ask yourself if the costs and effort is worth 60 customers. Or you have to ask yourself, what can I offer my clients that I can provide now? What can I leverage to make technology easier for my clients? Or just go out meet your clients, talk to them and sell something.

BTW, ATT is even getting out of over-the-top VOIP as it starts closing down its CallVantage service.

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