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How to make money on VOIP

By Telco2 min read

If you ask any prominent Australian telco analystshe will tell you of the proliferation of VOIP providers here. The pattern in Australia is that the distribution of resellers (both in VOIP and other resale) is skewed, not using the 80:20 rule, but more like the 98:2 rule. There are many many very small providers, some turning over just thousands of dollars per month.

So when a company like Vonage starts to hedge its bets and go the MVNO route, everyone else should be taking notice. Vonage has over a million VOIP customers, and were a pioneer in the US market, growing very quickly indeed. Their free calls between Vonage customers caused a viral marketing effect, combined with a broad (ad expensive) advertising campaign.

These days it costs them some $US306 to acquire a customer, who might pay as little as $US19.95 per month. With numbers like that, it’s not the technology that is lightyears ahead, but the payback! So they are doing the obvious thing: adding other products like broadband and content, which will boost ARPU and gross margins.

Smaller VOIP players should heed. You have several options before you: lower customer acquisition costs (relative to customer spend), increase margins, or increase product mix. Preferrably, do all of them. If not, you will not be able to survive. If you are small, then using an aggregator such as ISPhone or iVox might be the only way to build a sustainable business that sells VOIP. Even if you are big, you should act sooner rather than later to secure the future of your business.

This was also posted at [Billing Bureau].

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