The costs of being Vonage

Internet phone company Vonage became one of the first flameouts of the current dot-com era after a disastrous public offering earlier this year.

Since then, its shares have lost more than half of their value. The company said Tuesday that losses continued to mount in the second quarter as it increased spending on marketing for its Web-based telephone services.

There was some good news, though; revenue increased to $143.4 million, up from $59.4 million in the year-ago quarter, and the company added 256,000 net subscriber lines during the second quarter.

But it is still fighting with investors who bought into the public offering, which debuted at $17 and quickly fell. Many customers refused to pay for the shares; Vonage said it still intended to collect from them, but acknowledged Tuesday that it had paid $17.9 million to underwriters as compensation.

Blog community response:

"In 2005, Vonage spent nearly $414 million in advertising to gain market traction, according to AdAge. Makes you wonder how much it will have to spend more in 2006 to keep the momentum going. It will have to -- it needs to find new subscribers to handle that churn situation properly and show growth across the board."
--Om Malik

"It had been rumored all along that the IPO plans were really a bluff to get someone like BellSouth or Sprint to buy them out -- but the telcos called that bluff and they're probably happy they did."
--Techdirt

"There's no doubt this will be ugly. The combined problems of lawsuits, failure to meet the street's expectations, and continued losses will make it difficult for the company to raise more money as their financial resources are tapped. Management has their work cut out for them."
--Alec Saunders .LOG