Is VoIP service a bubble ready to burst, or is VoIP still an emerging technology with plenty of room for steady growth? Here’s one take:
It’s looking more and more as if the VoIP hype bubble is going the way of the Internet bubble. Skype, bought for up to $4.1 billion by eBay, is turning out to be a bad investment, and as for the Vonage IPO — it’s more than 40% under its IPO price of a few weeks ago, and heading south.
eBay has shown a variety of ways that Skype will integrate with auctions and with PayPal. You’ll be able to make or request PayPal payments from Skype. You’ll be able click links in auctions to talk to others via Skype. You’ll be able to talk to eBay customer service reps via Skype.
All very nice. But not $4.1 billion nice. As I’ve said before, eBay got taken for a ride.
Vonage investors also got taken for a ride. The IPO went out at $17 a share. It’s now under $10, and may well keep sliding. If there’s any justice, it should keep sliding, because there’s no future in this company.
eBay and Vonage investors got carried away with irrational exuberance over The Next Big Thing. VoIP is the future! VoIP will change the world! VoIP will make you rich!
In fact, VoIP is the future, and it will change the way we all communicate. It just won’t make anyone rich fast. It’s a great technology, and it certainly is the future of voice.
6-22-2006 03:26:31
I couldn’t disagree more with your characterization of Vonage as a company, although you are close to the mark.
While Vonage may very well go the way of the dinosaur and BetaMax video tape, it will have nothing to do with the quality of the service or the nature of the product. The failure will be the direct result of the irrational behaviors of consumers in the technology marketplace.
There is a nasty assumption in the “hidden-hand” guiding Adam Smith’s marketplace — the assumption is that consumers are well-enough informed to make intelligent purchasing decisions. When the products being sold in the marketplace are relatively simple in nature (books, cheese, etc.), the marketplace works fairly well and the best products tend to have a niche. However, time and again consumers (especially American consumers) have shown their inability to make intelligent decisions about products in the technology marketplace. People make purchasing decisions based upon all kinds of irrational yet perceived needs, but very few consumers make purchasing decisions based solely on the quality of the product — especially technology products. How else can you explain Microsoft operating systems continuing to dominate the PC marketplace? How else can you explain the fact we don’t all drive Volvo’s or Mercedes Benz automobiles? Clearly Ford and GM are not the better products.
I’ll tell you one thing, Vonage has given me more product and better service in under two years than AT&T, Pac Bell, or SBC Global was able to do in five decades. Why people continue to pay the same exorbitant fees to the bell operating company that Judge Green broke up 35 years ago is beyond me? Vonage costs me roughly 15% of what SBC used to charge me per month.