VOIP Is No Longer Just For Techies

'No Nerds Needed': Voip Is No Longer Just For Techies

November 3, 2004

By Suzanne Vranica

Telecommunications has been an advertising battleground for several years, as both regular "landline" phone companies and cellphone giants have fought increasingly bitter contests for market share.

But the fight is intensifying with the introduction of Internet phone technology known as voice over Internet protocol (VOIP). Led by start-ups like Vonage Holdings, an independent New Jersey company, Voip phone service is now available from cable-TV operators like Cablevision Systems Corp.

More recently, old-style phone companies like Verizon Communications Inc. and AT&T Corp. have offered their own version of VOIP. All are offering the new service at sharp discounts to regular phone service. About 800,000 Voip connections are likely to be established by the end of this year, analysts predict, rising to 17 million by 2008.

While Vonage was one of the first into the Internet-phone market, the new competition is forcing it to boost its advertising budget to maintain its growth rate. Below, Jeffrey A. Citron, Vonage chairman and chief executive, discusses telecommunications' hottest new marketplace and how his company's marketing is evolving.

'We are shifting to do more mass marketing,' says Jeffrey A. Citron. Company: Vonage Holdings Corp. Title: Chairman and CEO

WSJ: You recently hired a new advertising firm. Why and how will your marketing and advertising change?

Mr. Citron: We have had a lot of growth that has been driven by an integrated marketing campaign done by Aegis Group's Carat. Their campaign focused on online advertising but the dynamics of the business is changing. We are making adjustments to broaden our target.

We hired a new agency. Right now our target for our advertising is consumers who have broadband [high-speed Internet] service. But the consumers that have that service have changed. They have moved from being just tech types and males to include more of the masses and females. We need a softer approach to reach them. We are shifting to do more mass marketing.

WSJ: How much have you increased your marketing budget?

Mr. Citron: For this year 2004, we spent about $40 million. We plan to spend about $75 million next year. Half of the budget will be used for online marketing and the other half on other mass communication such as TV ads, radio and sports programs. Those will help brand building and generate mass awareness.

WSJ: AT&T, the granddaddy of the telephone business, is competing with you now. How do you compete with its brand name?

Mr. Citron: Easily. AT&T's brand stands for something and right now AT&T doesn't know what that is and clearly AT&T customers are confused about what AT&T is offering them. AT&T is marketed to businesses, the CEO has now come out and said they are going to focusing all their energy on business-product services and how AT&T no longer will be marketing their retail consumer service.

They are laying off about 10,000 people and many are in their consumer division, and then they are out there saying 'use our residential Voip service.' I don't think customers will buy that. The AT&T brand is changing to be a business-oriented brand. Vonage is focusing on the residential market and small business. That is where we will continue our efforts.

WSJ: Your recent advertising has used phrases such as "No nerds needed." Are you trying to convince folks that this service isn't reserved for the tech elite?

Mr. Citron: You hit it on the head. Yes. Obviously broadband has crossed from being tech-oriented to being a service for the masses. It took a long time for broadband to get that kind of recognition. Clearly we are skewed toward males but females are increasingly using us -- it's much the same way broadband users have changed.

WSJ: In some instances people who sign up for Vonage can't keep their phone numbers, or have their numbers listed in the phone book. What's more, there are some issues with your 911 service. How are you using your marketing to offset these negative issues surrounding your service?

Mr. Citron: We are on an aggressive campaign to import numbers. Now the vast majority of our consumers can import their numbers. But some companies refuse to allow customers to take their numbers with them. We can't stop that. We found most of our customers don't want their number listed in the phonebook because they are trying to avoid telemarketers.

I don't think that is an obstacle, I think it's a benefit. On 911, we are making progress. We now have a 911 regular service in Rhode Island. The same service you get from Verizon. We are going to continue to work on other markets.

WSJ: There is a perception in the marketplace that AT&T's Voip service goes over the AT&T network, while Vonage calls go over the public Internet and that difference allows AT&T to offer clearer service. Is this true? And if not are you going to use marketing to change that perception?

Mr. Citron: That is false. I am not going to try and convince you that our service is on par with others. I am going to show you. Recently, Smart Money magazine conducted a blind survey that included AT&T's service, a couple of independent providers, a landline phone and a Cingular cellphone.

Zero was the worst score and 5 was the best. Verizon's wireline scored a 4.0 and Vonage got 4.1. I was p-ed we didn't get 5.0. AT&T scored 3.5 and Cingular Wireless got the worst rating. So AT&T can go out and say they have the best service but we can say let's look at independent research. That speaks for itself.

WSJ: Cable companies such as Cablevision Systems are selling Voip in packages including Internet, cable TV and phone services. How do you compete with those offerings? Will some of the neat features that you offer such as call forwarding and voice mail become more pronounced in your marketing?

Mr. Citron: There are others in the market and some have done a good job, like Cablevision, but Vonage has more customers. And we added more new customers last quarter than the others. Vonage is independent. You can use it over any broadband [service] and it provides some advantages.

When you move, you can take your service with you. ... Vonage has a richer user experience and that will attract customers. Consumers can go online and get their messages or they can have them e-mailed. ... We talk about all those features and users' experiences in our marketing.