How Vonage is dialing up big money by pivoting to enterprise

Remember Vonage?

It was once the future. Cheap “landline” calls from home, only over the Internet. Don’t laugh. That was less than 10 years ago. Now for the surprise. Vonage is still around and it’s stock this year is way up — all thanks to a savvy pivot away from the consumer market and a timely embrace of the enterprise.

Vonage made an IPO in 2006, a year before the iPhone debuted. It was the beneficiary of wall-to-wall financial media coverage, with most of that coverage certain that this thing called “VoIP” (voice over IP) was going to remake the consumer communications market. The mad rush to IPO led to an inevitable backlash. CNBC’s Jim Cramer branded the new stock a “dog.” The company was sued by Verizon for patent infringement, then sued by investors when the IPO price quickly went south, then investigated by the feds for rumored short-selling misdeeds.

That was the small stuff. The bigger problem for Vonage was that its service, aggressively marketed to consumers, relied on routing calls via the Internet — over pipes the company did not own. This meant the owners of those pipes — Verizon, for example, or Comcast — could offer a similar service with lower costs and on the same bill as the customer’s Internet or cable TV package.

Vonage fought against this in large part through relentless advertising. Marketing could not stop the pace of technology, however. iPhone, Android, the rise of Skype, low-cost global messaging apps, all put relentless pressure on the margins of voice calls, which in turn placed relentless pressure on Vonage, chipping away at its very reason for existence. The many rumors of Vonage shopping for a buyer surprised no one. What is a surprise, however, is that Vonage has successfully embraced the latest communications craze.

It’s called Unified Communications (UC) — or Unified Communications as a Service (UCaaS) — and it’s a growing, multi-billion dollar market. UC includes not only voice service, but messaging, presence, video chat, and web collaboration. It is extremely important to businesses of all sizes.

The goal of unified communications is three-fold:

  1. Reduce total communications costs
  2. Enable robust, seamless communications across desktop phone, smartphone, the PC and the web
  3. Leverage these communication types to improve productivity and collaboration between staff, partners and customers

Oh, and UC must do these almost entirely over the cloud and with the same quality as traditional landlines or PBX, (and without a loss of uptime). Plus, UC should make it way easier for a business customer to change their service, to quickly add a new employee, or to bring a new office or franchise online. This is not a simple undertaking.

Businesses are not going to select their communications service provider based on the claims of a late-night commercial, and certainly won’t entrust such a critical need to a company with no control over its platform.

Not surprising, Vonage has succeeded in its shift to enterprise unified communications primarily through acquisition.

Last November, Vonage spent $114 million, mostly cash, to acquire Telesphere, an early player in unified communications. Telesphere offered business phone service, multi-point videoconferencing, mobile office solutions and, most importantly, its own nationwide cloud platform.

Vonage wasn’t finished. This past April, Vonage acquired Simple Signal, another unified communications provider, for $25 million. Whereas Telesphere focused on medium and large-sized businesses, Simple Signal focused primarily on smaller businesses.

But, wait. This is Vonage. What makes them think they can succeed in the business-focused unified communications space — beyond using their available cash to buy up existing companies? CEO Alan Masarek offered me a ready response via email, which I confess did mitigate some of my original skepticism.

“Our consumer business provides substantial and predictable cash flow.” This allows Vonage, Masarek said, “to reinvest in organic and inorganic growth.” He also stated that the Vonage consumer-side business drives brand awareness even in the business market — something his competitors do not have. Though he did not provide figures, Masarek said that the scale of Vonage’s consumer business, helps drive down operating costs.

For now, these efforts appear to be paying off. Vonage’s Q1 2015 revenues of $220 million were flat, though the business segment was up 49 percent year-over-year, to $42 million. As of the second quarter, business revenues are now more than 25 percent of total revenues. According to a Vonage spokesperson, Vonage’s 118 percent revenue growth leads the industry. Even better for shareholders, Vonage’s stock is up 85 percent since the company shifted to unified communications.

The goal now is to drive organic growth on the business side — not just buy customers. Shortly after the Simple Signal acquisition, Vonage brought in Ted Gilvar to oversee marketing. Gilvar’s mission is to promote the Vonage brand in the B2B space, particularly to small and medium-sized businesses. The company has just launched its “Business of Better” campaign, and is hopeful of a turnaround. At the very least, Vonage has managed to go from laughable to a company worth keeping an eye on.

VoIP provider Vonage gets into the calling card biz

Vonage is expanding its reach yet again. This time the VoIP provider will offer a long distance calling card aimed at people who want convenient pre-paid international calling without hidden fees or even a physical card. This helps it move beyond land line phones.

Vonage’s Mobile App Embraces Facebook

Vonage today released an application for Facebook on iPhone and Android that provides free voice calls between Facebook friends over Wi-Fi or a 3G wireless network. With past struggles to stay viable as a VoIP provider, this app might give Vonage a new lease on life.

Jive Software Wants to Be Facebook for the Enterprise

Jive Software today launched what it hopes will become a Facebook-style social networking platform for businesses, complete with an activity stream, an open API and an application store. But whether Jive’s new offering can make social networking more palatable to business users remains to be seen.

AT&T Now Allows Internet Voice Calls On Its Wireless Network

attlogoRumors were circulating earlier in the day, but now AT&T (s att) has made official its plans to allow Internet calling services to be used with its wireless network. That’s great news for iPhone users, at whom the news was mostly targeted, since it means we could shortly see Skype, Vonage, and Google Voice apps appear on the app store with full 3G functionality.

The official line is that AT&T is responding to customer expectation and demand considering the introduction of VOIP-capable devices like the iPhone, but in reality, with the FCC investigation into wireless industry competition hanging over its head, AT&T is probably trying to fend off government-mandated penalties in advance. Read More about AT&T Now Allows Internet Voice Calls On Its Wireless Network

Why Vonage Mobile Is Too Little, Too Late

Vonage today announced a line of apps for the iPhone, iPod touch and BlackBerry. Once a pioneer of VoIP, the company has fallen out of favor over the past few years and the release of its apps, collectively dubbed Vonage Mobile, is being viewed as a chance for Vonage to regain its luster. Unfortunately, it’s too little, too late.

Vonage Experiences App Store Bump

vonage_logo

If you watch TV, then you probably can’t erase the memory of Vonage (s vg) commercials from your brain, no matter how hard you try. The voiceover IP (VOIP) provider has been in business for quite a while now, but it has been losing ground to cheap alternatives by various cable TV service providers. Enter the App Store.

Today, just by announcing that its iPhone app received official approval from Apple (s aapl), and without releasing any details about what said app actually does, Vonage engineered a major stock surge for itself. Share prices are experiencing big gains based on the potential benefit an App Store presence could bring for the VOIP operator. Read More about Vonage Experiences App Store Bump

Top 4 Ways to Cut Your Business Budget With VoIP

Vonage-logoWeb workers do pretty much everything else online, so why not use Internet phone service, too? Besides our natural technology addiction, there are actually compelling financial reasons for why using VoIP (voice over IP) services can be a good idea.
The cost savings can be significant over traditional landline phone services, depending on the needs of your business and whether you make a lot of long-distance or international calls. Here’s a look at the top four ways to cut your web worker budget by using a VoIP service.
Get a business phone number at a fraction of a landline’s cost. Using VoIP can save money on a business line in both service and installation costs. Service for a landline into my home office from our phone company would cost around $30 per month for local service, with long-distance calls additional. Read More about Top 4 Ways to Cut Your Business Budget With VoIP

Vonage Will Release Apps For Smartphones

[qi:gigaom_icon_voip] Vonage (s vg), a VoIP services provider, is making its first move to mobile by developing smartphone applications, the New Jersey-based company has confirmed to us. The news was first reported by Gadgetell. Unfortunately, Vonage wouldn’t provide many details on the applications other than to say it’s in talks with “top” smartphone makers, and that the applications will be available in the second half of 2009 and will offer competitive international calling rates. Read More about Vonage Will Release Apps For Smartphones

MagicJack’s Next Act: Femtos, Softphones, and…an IPO?

magicjack

Amongst all the burning wrecks of the voice over IP startup scene, is it possible that a $40 device hawked on late-night TV may be emerging as one of the biggest VoIP success stories ever? If you believe founder Dan Borislow, that is what is happening with his idea called MagicJack, a simple USB-based VoIP device that Borislow claims will generate $100 million in revenue this year, a market momentum that may spark an initial public offering to help fund his ambitious expansion plans. Read More about MagicJack’s Next Act: Femtos, Softphones, and…an IPO?