Vonage Growth Slows in Q4

Seems like the tough road for Voice over IP provider Vonage is getting tougher — the company reported financials today for its fourth fiscal quarter of 2006, with a big red flag, that subscriber ads fell far below analyst expectations, with just 166,000 additions in the three-month period. Reports we read said analysts were looking for a figure more in the 250,000 range.

According to a Reuters story on the earnings, maybe those funny ads with the boxes hitting people in the head weren’t translating into customer wins:

Vonage Chief Executive Michael Snyder said one factor behind the slower customer additions was ineffective advertising, which prompted the company to switch to more informative ads in late December.

Vonage also said that customer acquisition costs jumped to $306 per add, up from $256 per new subscriber in Q3. Though chairman Jeffrey Citron maintains that Vonage will reach profitability in 2008, you have to wonder how they will make it that far. As UBS analyst John Hodulik notes, “We remain concerned about the growth in the business in the face of increased competition from cable MSOs.” More as we dig through the release.