Ryou+K.+strategy+report

Ryou K  To: Proximity Mobile Team From: Kuk Hoon Ryou Date: February 25, 2010 Subject: Vonage Strategy Analysis

Below is a strategy report on Vonage. Vonage was known as a front runner of the Internet protocol based phone call service provider. Now, many competitions from other providers jeopardize Vonage's position, so Vonage has to find way to rise again.

Vonage Holdings Corporation provides phone call service based on Internet protocol to residential, small business, and home office customers. Vonage was established in Edison, New Jersey in January 2001 and, now, is located in Holmdel, New Jersey. At first, Vonage had offered their service throughout the United States. In April 2004, Vonage started to provide their service in Canada, and in January 2005, the company offered their service in the United Kingdom. In December 31, 2008, the company had the most subscribers nearly 2.6 million. The Name of the company is a play on their motto "Voice-Over- Net-AGE." The CEO of the company is Marc P. Lefar, the CFO is John S. Rego, and Louis Mamakos as CTO. (Wikipedia, 2010)
 * Profile **

In 2008, the revenue of the company is estimated to $900.12 million, and net income is $-64.58 million. The employees of Vonage are over than 1600 throughout worldwide. (Wikipedia, 2010)

Until August 2007, Vonage dominated the VoIP market, but now there are many competitors in the market was offered similar or better service to customers. They also got in trouble with patent among other phone call service companies such as Verizon.
 * Competitive Landscape **

On June 19, 2006, Verizon sued Vonage about patent related VoIP service. Verizon asserted that Vonage infringed on five of Verizon's patent related to its VoIP service. On March 8, 2007, a jury gave a decision that Vonage guilty of infringing three patents held by Verizon, but two of them are not guilty. The jury ordered Vonage to pay $58 million and royalty rate of 5.5% of every sale to Vonage customers to Verizon. (Wikipedia, 2010)

One of powerful competitor of Vonage is Skype. Skype is free software application that allows users to make phone call through the internet. Many mobile devices company provide Skype application, such as PlayStation Portable, iPhone and iPod, and others. It also make phone call between Skype and land line. If you make phone call from Skype to Skype, you do not have to pay any fee for making phone call, but if you want to make phone call from Skype to land line or cell phone, you can call with small amount of money from $0.021 per minute. It is different based on countries. There are, also, several flat sum systems. (Wikipedia, 2010)

When Vonage established, they did not have strong competitors such as Skype. Now, however, there are many phone call service providers similar as Vonage. As a result, they threat existence of Vonage.

Vonage choose international telephone call service to make turning point for secure profit. Their domestic phone call profit in the U.S. is getting worse. On the other hand, the market of international phone call service is getting bigger.
 * Vonage's Strategy **

Vonage has been offering unlimited phone call service among 6 countries, and now the company is increasing their line to other countries for expanding their market place.

The typical characters of Gen Y are digital and mobile. They are using smart phone, net book, and laptop. Those devices are well designed for unconstrained mobility. Desk top is not any more the classic form of PC, and the land line and regular cell phone cannot grasp Gen Y’s attention. In other word, a technology lack of mobility is not the concern for Gen Y. They want to make phone call whenever and wherever they want, and look up whatever information from the Interne without any restriction. In this point, Vonage cannot be accepted to Gen Y because Vonage has weak mobility. In case of Skype, they offer their application for smart phone and other devices, so users can make call wherever they want. On the surface, Skype is better than Vonage or, at least, similar in every side. The key point for Vonage to appeal to Gen Y is 3G and epochal cost rate. Up to now, Skype cannot make phone call through 3G network because mobile network company restricts using it for protecting their service. If Vonage acquires the right of using 3G network, they could appeal to Gen Y and also they can rise again as a leader of the Internet phone call market.
 * Gen-Y Implications **

Vonage. (2010). //Vonage //. Retrieved February 25, 2010, from Vonage: [] Wikipedia. (2009, March). //Skype //. Retrieved February 25, 2010, from Wikipedia: [] Wikipedia. (2009, June). //Vonage //. Retrieved February 25, 2010, from Wikipedia: [] 
 * References **