It’s been a while since Vonage’s annoying advertisements were ubiquitous. Those ads were seemingly unavoidable scourges of mere mortals who wished only to be left undisturbed while watching television, surfing the web, or even just walking the streets.
Vonage’s advertising cutback has been a relief for consumers throughout North America. It’s also been a benefit to the company itself, which reported a sharply narrowed fourth-quarter loss today as a result of significantly reduced expenditures, mostly pared from its previously incontinent marketing department.
Don’t get the wrong idea, though. Vonage is losing less money than it has lost historically, but it hasn’t rescued itself from a death of a thousand cuts.
On the positive side of the ledger, Vonage revenues rose 19 percent to $215.9 million from $181.5 million in the fourth quarter last year. That’s not blistering growth, and it’s a falloff from the company’s earlier revenue increases, but it’s better than what I fear awaits the company a year or two from now.
Moreover, with the reduced expenses, Vonage recorded a loss of just $11.1 million, or 7 cents per share — excluding charges for litigation and severance payments, the loss was 6 cents per share — whereas analysts polled by Thomson Financial were expecting a loss 10 cents per share. In last year’s fourth quarter, the company lost an eye-watering $117.1 million. Vonage could ill afford to continue that sort of profligacy.
Unfortunately, that’s probably as bright as the picture will get for Vonage. Expenses might be down, but customer churn is at an unacceptable three percent, up from a relatively high 2.3 percent last year. Word of mouth from disaffected customers is probably doing the company more harm than its ridiculous advertisements caused in days of yore.
Vonage thinks its flat-rate pricing for calls in North America will help it endure a recession, but I’m not so sure. I think consolidation reigns during such downturns, and Vonage isn’t in a position to fight off the encroachments of service-bundling telecommunications titans and cable MSOs.