Vonage's shrinking target market

Posts: 103 · Posted: Sat Jul 08, 2006 6:15 am Post subject: Niche market or not

I have read the postings in this thread, and it almost sounds like a bunch of guys on the Monday morning after talking about how they would have play the game, run the election, or managed some company.

In any event, yes, there is a limited niche for Vonage products, still, it is an important and valuable niche. I needed a fax line. That really cannot be done with a cell phone (yet) and, my cell service at my house is terrible. I use Vonage for my business, and I needed a (954) and a (561) number (virtual numbers!!!). I also wanted something cheaper than getting another cell phone to carry around just for business calls. I imagine that if I had kids, I might want a house number connected by twisted pair. So far, Vonage has worked great for me. I have my Vonage number on all my business cards, and when I eventually move my office, I won't have to deal with Southern Bell. I can just take my PAP2 and move. I have a FAX line, and it costs me the same each month for phone service. Except for the problem of not having an outgoing caller ID with my business name, Vonage has been great.

Posts: 111 · Vonage Forum Senior Joined: Jun 15, 2006 Posts: 111

I agree Cargo, my wife uses Vonage for her small business as well, and if you fit into one of the niches Vonage targets, it certainly is a good deal. Especially considering that Vonage heavily subsidizes the service with money it has raised from investors in private placements and IPOs.

We are enjoying it while it lasts, but it won't be too long unfortunately. We also enjoyed WebVan before it went bankrupt!

Posts: 103 · Posted: Sat Jul 08, 2006 6:06 pm Post subject: A simple bet

I hear your pessimism, but I would bet you a 100 teragig hologram drive, (they will exist in five years) that in five years, Vonage will still be around.

Posts: 111 · Vonage Forum Senior Joined: Jun 15, 2006 Posts: 111

They have spent a lot of money spreading their brand name, so it is likely the name will still be around in 2011 and denot a VoIP service, however what will happen is the company will go bankrupt, shareholders will be wiped out, and Vonage's creditors will receive all of the proceeds from the sale of the trademark.

The value of the name is not that much though. TiVo is an even better known brand name, yet the stock went down 85%. TiVo's competitors found they did not need a seperate brand when they builded TiVo-type services.

The same applies to VoIP.

Posts: 94 · Vonage Forum Senior Joined: Jun 17, 2006 Posts: 94

Tivo was very susceptible to a copycat product from cable.

Vonage will see competition, but having the critical mass makes it very difficult to unseat them.

Maintaining a low price point is also key to the strategy.

The name of the game is acquiring high speed broadband customers. ( Time warner is giving away AOL services to these type customers.)

Posts: 111 · Vonage Forum Senior Joined: Jun 15, 2006 Posts: 111

You mean TiVo sells a fungible commodity and is subject to being undercut by Cable companies, which is why its stock is down 85%.

OK people, move along, no analogy to Vonage here...

Posts: 94 · Vonage Forum Senior Joined: Jun 17, 2006 Posts: 94

The TIVO product is a commodity product, and it was perfect product for cable companies to copy.

VOIP service is a commodity product also, but new entrants to the market must gain critical mass for the venture to be worthwhile.

Critical mass was not as important in the DVR market because you could run a profitable business by offering 100 boxes and charging $35 a month for the service. (I'm not saying cable companies would do that however).

The only companies that will survive in the retail VOIP market will be companies that have a significant amount of customers. ie.critical mass. That is because the marginal cost of adding another customer is almost zero. A good analogy to this would be AOL's dominance of the dial-up internet market in the very beginning.

AOL would have continued to dominate today if broadband hadn't changed the playing field for good.