Old dog, older tricks


Jeffrey Citron, the maverick founder of Vonage, might be taking a page out of his online trading playbook again and using it to manage and run the fast growing, cash guzzling VoIP service provider. Bill Burnham, who used to track online trading business as an analyst before switching gears and becoming a VC draws the parallels in this excellent post.

In that industry, Ameritrade, Datek and E*Trade were able to pull away from the competition by dramatically ramping their customer acquisition spending and that appears to be exactly what Vonage plans to do in the VOIP space. In fact, the financial language that Vonage is currently using to talk about their business where they claim to be “cash flow positive before customer acquisition costs” is a carbon copy of how many online brokers talked about their own financials back in their heydays of online trading.

So what does this all mean? Bill says that the cash being spent on customer acquisition is a way to “get big fast,” just like in the online brokerage days. He argues that Vonage actually might be able to do well, if history is any indicator. I don’t agree. Unlike the brokerage industry, here the incumbents are not sitting on their haunches, and are actually moving forward with remarkable alacrity. I think Vonage is hoping to grow really fast, go public, and perhaps cash out before people start asking those pesky questions about profits.


Online University

Where can you find the best online universities and get an accredited online degree that will raise your salary? Our online education site i-university-guide.com is helping working professionals like you get online degrees in only 2 years while working. For example, the university of phoenix offers the best online bachelor degree in many fields. Get your online degree now.


the current Vonage biz model has zero chance of making it long term due to customer aquisition Costs………..IF I spent a few hundred dollars of somebody else’s money to aquire customers, I TOO could grow my Packet8 subscriber customer base numbers………….they are going to go PUBLIC, its in his blood to take it public, CASH OUT, and run for the hills……………..time will tell!


Comments are closed.