Scary Vonage factoid

If you haven't noticed, Vonage is running TV commercials touting the use of their Voice Over Internet Protocol (VOIP) service.

"Vonage is a leading provider of broadband telephone services with over 2 million subscriber lines as of September 30, 2006. Our award-winning technology enables anyone to make and receive phone calls with a touch tone telephone almost anywhere a broadband Internet connection is available."


(View the Beauty & the Geek TV commercial)

Vonage uses the tagline of using their service as "a smart decision among many, many stupid decisions".

Frank Barnako's Internet Daily notes that "Vonage spent $254 for each new customer it signed up last quarter. The average revenue per customer was about $26."

Even in May of 2005, GigaOM wrote:

Vonage is spending $21.829 million a month on Internet advertising alone, making it the second biggest money spender online. If you look at the number of customers they are adding - 15,000 a week or 60,000 a month, that makes it about $363 per customer in acquisition costs. Never mind that they are advertising like crazy on television and in the print media. If those figures are taken into account, then we could see final customer acquisition cost of around $400.

FCC explains what VOIP is

I wish somebody could explain to me how companies get by burning so much cash in order to dominate a market, either for an IPO or aquisition by another company. Where does profit enter in as a business non-negotiable?