Could VonagePro Save Vonage?

A few weeks after Vonage went public, I started to write a post entitled, “Could SIP Trunking Save Vonage?” I never ended up finishing the post because at the time I was still working with Vonage and knew that they had zero ambitions of getting into the true business VoIP marketplace. The basic premise of the post, though, was that Vonage has the infrastructure, brand and reach to offer a true business quality phone line (I hate the term SIP Trunking) service that would be a big enough win for the company that it could pull them out of the red and into the black.

After recently hearing about Vonage’s search for a product manager for VonagePro, I revisited my post and below I extrapolated on my thoughts from two years ago, on why VonagePro could save Vonage.

1. Brand Name - Five years after starting my career in the VoIP industry, I still use the line, “Have you ever heard of Vonage?” to begin to describe what it is that VoIP Supply does. The brand name resonates with the mainstream and it is that name that would empower Vonage (and their VAR channel) to gain an instant foothold with business customers.
2. Infrastructure and Technology - Offering a business phone line over IP (SIP Trunking) is not incredibly difficult. Vonage already have all of the infrastructure and technology to turn on this type of service. They don’t need to build out and scale-up like many of the smaller business VoIP providers…they are already there.
3. VAR Channel - I speak to a lot of business VoIP providers. All of them are talking about building a channel. I talk to a lot of VAR’s who need a business VoIP provider and a driver of business with customers. Vonage, due to their brand name, gives VAR’s a better driver than smaller, regional plays and a name that resonates with customers. Vonage could easily build a massive nationwide channel.
4. Lower Acquisition Costs - Vonage talked a lot about lowering customer acquisition costs during their recent Q1 reporting. Business services are typically not “directly marketed” such as Vonage’s residential and SOHO services, they offer through a VAR channel. In general, the channel is much cheaper in terms of customer acquisition costs, because Vonage will only pay out when a customer purchases.
5. Bigger Market - Sure there are more residences than businesses in the US, but VoIP, in it’s current state, is better suited for businesses, than residential users (due to things such as 911). The recent consumer adoption rate slow down in Q1 is a sign that the second wave of adopters is taking a much more critical look at the technology. If overall VoIP adoption rate is slowing that means the size of the pie gets smaller. Vonage is already losing ground to the cable co’s, so a smaller percentage of a smaller pie makes being a residential pure-play provider a risky move. The business market place is still growing and will continue to do so because the limitations of the technology at the consumer level due not impact businesses as much.

Vonage has the potential to due for business VoIP what they did for residential VoIP. The business VoIP market place is much more fragmented and there is not one provider who can lay claim to being a true, dominant, number one. it won’t be easy for Vonage and their VonagePro service to become that number one, but they have all of the pieces of the puzzle to do so. Can they execute and put them together? That’s not something I can answer, but they did do one heck of a job with their residential service.