Vonage released its second quarter financial results today (I’ve embedded the release below with the new Zoho Viewer that launched last night). And while the stock continues to slide, revenues are way up and losses are slowing. Perhaps they can avoid the fate of competitor SunRocket, which shut down last month.
The company also says that they have “substantially completed” the workaround deployment for two of the patents at issue in the company-threatening patent litigation with Verizon. And development of the workaround for the third patent at issue is completed says Chairman Jeffrey Citron. A Federal court will have to agree before the company is in the clear.
Revenues for the quarter were a record $206 million, a 43% increase from the same period last year. Net losses were $34 million, down from $74 million in Q2 2006. The company still has $344 million in cash, although $66 million of that is reserved for collateral in the patent litigation.
Some bad news, though - customer churn increased to 2.5%/month. The company says they are extending the grace period for non-payment to encourage retention…but they may be retaining the deadbeats.
I am a long time Vonage customer but will soon be switching to Ooma (which, by the way, became available for purchase this morning) and getting rid of that $25/month Vonage fee. Vonage is a lot cheaper than a normal phone line, but free is hard to compete with. Perhaps some of the new hardware Vonage is testing with some customers will help them.





I always liked Vonage, especially their ‘V-Phone’ USB-Phone combination. Hope they survive…
Ooma cannot accurately be described as free, unless you got one of their Beta appliances. I’m sure you’ll be getting your box for free, but an average consumer will pay $400, which is roughly equivalent to 16 months of paid Vonage service.
Ooma will be tits up well within 16 months from now, which makes Vonage a better value for consumers.
“Today, communication itself is the problem. We have become the world’s first overcommunicated society. Each year we send more and receive less.”
bdb - thanks man. I appreciate the words of support. It’s the encouraging comments that keep me going. heh.
I really like Vonage, and love sticking it to “the man” by not having a regular phone line but ever since I switched from “daisy chaining” my Vonage modem to a router, the service has been terrible (incoming calls don’t get through) and whenever I’m on the phone, the old PC that *was* daisy chained looses it’s net connection.
Called support and it was terrible, they ended up hanging up on me and “promising to call me back”. Long story short, that call never came and I’m thinking about ditching Vonage altogether and go completely cell based.
And NO I’m not paying for a network Vonage modem just to fix this problem.
/rant
All I know is I have been trying to cancel Vonage for about 3 months now and every time I call I am on hold for a very long time and then they basically disconnect me. It is a wonderful process for customer retention.
Michael,
I just wanted to comment on above comment #3.
This website is actually one of the best on the Internet. It is also one of my favorites. I have hundreds of colleagues in the engineering and tech fields. They all read TechCrunch.
Keep up the great work.
–
Frank - I must point out that you work for AOL. Black pots, kettles and all that.
KindAndThoughtful - thanks. but tell them to click the ads please.
Thanks Mike for pointing that out.
Very funny Mike.
Well, haven’t commended you in a while now. Thanks for the hard work you put into TC. Any work on TCUK? 
Michael,
Thanks for the response…and I will pass on your suggestion!
Again, keep up the great work.
I really wish the people who hate TechCrunch would stop posting the innane comments. It makes it a pain in the ass to participate in the conversation, particularly those “Duncan sucks” ones. You guys are like Sidwell Angel from the movie A League of Their Own - the annoying fat kid who kept teasing everybody and pissing people off. Make a good argument at least.
I think Vonage will only improve as ISPs provision VoIP calls. Otherwise, there’s nothing anybody can do about jitter, drops, and other poor quality, which is the one thing that makes Vonage suck. Sorry, not a big fan of “free” voip calls - nothing’s free, and I fear what they will attempt to make money on (unless its services, but I think you have to have a pretty sophisticated network to be able to roll out new services that add value).
I don’t know. It’s early to have a brain about this stuff.
It’s not that I would not love to see a service like ooma thrive….I dig it from a technology standpoint….I just feel there is a herd of 800lb elephants in the room that will prevent this thing from reaching critical mass.
Ooma needs to substantially seed their network with peers who also happen to have PSTN lines plugged into their boxes (which although relatively cheap, are not “free”), so that they can utilize this P2P network for call termination.
If their peers are not connected to the PSTN, there is no way to terminate calls without using a commercial gateway, which costs them $$ to terminate each call.
Until then, they will need to utilize the services of commercial providers to terminate their calls, and there is nothing innovative in that scenario. They call this “Fake it till you make it”.
I believe that SIP based voice services will eventually become ubiquitous, much like email. I also don’t buy into the school of thought that claims ad supported “free calling” will fly.
A lot of service providers bank on selling users “advanced features” to generate sustainable revenues, but the vast majority of users (not first adopters) will never need/want anything but dialtone, call waiting and voicemail. Well, I take that back, perhaps they’ll pay for annoying ringtones and other mindless widgets….
Features are great for powerusers who actually find telephony mildly sexy, but for common folk, which is 99% of the market these companies need to court, they are not compelling.
Michael - I’m surprised you are going with Ooma. It really doesn’t seem like a sustainable model at all. How long will phone providers allow Ooma to essentially allow customers to cheat over their lines? And why do we want to keep traditional copper lines around? What happened to unified communications? I hope that Vonage pulls through, but what really surprises me is why Skype isn’t getting more coverage. For $100 a year you get unlimited nationwide calling, a voicemail box, phone number, etc. The phones are pretty nice - you don’t need a computer to utilize, its dependable, owned by a mega-company (eBay), etc.
I must be one of the few satisfied Vonage customers in the world. I live in Silicon Valley and have had Vonage for the last two years running on top of Comcast broadband. Both VoIP and internet have worked flawlessly even when both are actively being used. I hope Vonage sticks around because this (or something even better) is definitely the way it should be done in the future.
Wow, that embedded zoho widget sucks.
@bdb, I wasn’t talking about your argument, I meant in general. Do you post the “Duncan Sucks” comments? I don’t think so.
As for understanding why I think there is an opportunity for a fashion blog/social network/whatev online, I must not be all that dumb - Kaboodle sold for what was it? 30 million to Hearst? I made money on that. Guess there must be something up with that 5% of those fashionistas that actually use that stuff.
I do not come here to plug my site and get hits. I don’t need to.
And for the record, I personally think Duncan sucks. I think he brings down TC’s quality, but I can skip his articles easily. Skipping the 20 comments about how bad he is? another story
Take it easy BDB. I’m just saying.
Michael - Getting rid of the Vonage fee sounds appealing, but I’m not sold on ooma yet. With the current version you need unlimited local calling (which runs about $20/month) - right?
They say there will be a non-phoneline version of the product in the future, but I don’t understand how it will work exactly (and wonder if it will have the same pricing structure). I believe in the podcast they said something about how their bandwidth expands every time someone adds a system to the network, but it seems with a non-phoneline version, that wouldn’t be true. Am I missing something?
Have used Vonage across the world, and if it is wired right, it works really well. I am talking about clear calls and good success rates. Sure - it drops a call once in a while, but come on. It is over IP. Don’t you have to hit reload in your browser once in a while when a page doesn’t show up?
Am not sure if it a geographical issue, but i would not slam it for sure.
Michael - nice catch on the AOL thing.
My fave AOL retention tactic - “You can’t cancel online”. Guess they don’t believe that much in the power of the internet. Heh.
Eric, that makes two of us. Same story here: Silicon Valley (are we neighbors?), Comcast, Vonage, two and a half years. It’s worked fine the whole time, and the features are great.
What happened with the free ooma contest? Is this really going to happen?
http://www.techcrunch.com/2007.....r-readers/
Michael Arrington is just as bad as Ted Murphy at PayPerPost. In fact, even worse. At least Ted is honest about what he is. Michael is a total hypocrite:
http://techdumpster.com/2007/0.....-the-week/
How can you keep mentioning Ooma and keep ignoring your own payola issues? TechCrunch20’s Demo Pit? Ooma? Y Combinator? How many people pay you to write articles about their stupid businesses?
@ Patricia
The point of a blog comment system is to use it to elicit opinions. If you have a problem with that, then maybe you should just stop commenting. It’s funny that you use the comment system to tell other people not to comment. There’s an inherent problem in your logic.
Ooma may be free for you mike, but most others have to pay the $399 for it.
Plus it has some concerns about it. See it at http://techuntangled.com/concerns-about-ooma
furthermore, Skype appears to be a better alternative, even financially for quite some time, than Ooma. http://techuntangled.com/why-s.....-than-ooma
Peter,
the ooma product can be used with or without a landline. By using your ooma system with a landline, you get to keep your phone number, increase the reliability of your phone service, and retain traditional 911 services. This is the safest and most reliable way to use ooma, and allows you to still make and receive phone calls, including 911 calls, even if your Internet service is down or your power is out.
By using your ooma system without a landline, ooma will give you a new phone number and you will save the most money, however you will not be able to make or receive phone calls, including 911 calls, if your Internet service is down or your power is out.
However you want to use it, the cost of the product is the same (limited time offer of $399 for the ooma Hub and includes all of the premium services - the Instant Second Line and the Broadband Answering Machine).
To answer the second part of your question, Jon Arnold commented on an interesting piece of information last year:
http://blogs.pulver.com/jarnol.....res_1.html
According to these results, 36% of VoIP users rely on their POTS lines as their primary service, with VoIP as a secondary service (maybe for outgoing long-distance or international calls). Another 34% use VoIP as their primary service, but maintain a POTS line. Only 10% said VoIP was their only home phone service. So this puts the percentage of people who maintain a landline at 70%.
So, yes you are right, the capacity of the distributed termination network only expands if a user retains their landline. However, since phones lines are often idle (usually
@Techdumpster, um, ok.
Cool beans but I’m in for Skype and their new lines of functionality…Vonage is terribly cool too but there needs to be some cooler options for when one uses their systems. Vonage is too last year…And what’s up with the losses?
I’ve also had Vonage for several years and have had very little problems. I have my vonage box plugged into a linksys router running the sveasoft firmware which lets me prioritize the VOIP traffic (i think the standard linksys firmware allows this now, but it didn’t a few years ago).
The research noted earlier about 70% of VOIP users retain a landline is interesting and seems to be the basis of the Ooma model. I think there is a difference in answering questions in a survey and ponying up a $399 for a device. I kept a landline for 3 mths while testing vonage originally and then canceled the landline. I can say absolutely that even as an early adopter and someone that loves testing out new gadgets, that I wouldn’t spend $399 to try out Ooma. I have no plans to add a landline to my house. Maybe after I get my White Rabbit device and give it a spin, I’ll come out thinking differently about the device (but I’m still not adding a landline). If so, I’ll let you all know.
@ #28 Dennis Peng
Thanks for the reply Dennis. It will be interesting to see what they do as the percentage of non-phoneline users grows.
I dont mind Vonage most of the time,but when we are downloading on our computers the phone line is all messed up broken words and we sound like we are under water.Oh and its always hard to understand tech help.
As a confirmed cord cutter I ditched the POTS line 2 years ago and never looked back. Vonage has been working great. Vonage has had its quirks, and yes you probably get “what you pay for” but considering the varying available bandwidth of a cable service and the nature of parasitic VOiP, I really can’t complain. $20bux a month buys me all the phone service I’ll ever need and the cellular fills in for the road. Neat trick is to take the phone and modem with me to the Philippines (Manila) plug it into a DSL line and I can still call locally for no extra charge in Canada or the US with it working like I never left home. Nobody can tell the difference Cellphone roaming & LD charges would be an exorbitant $$$$. Yes, I do hope Vonage survives, and I think it will.