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VG - Kicking the Dog

Man, am I ever getting so tired of all the piling on over Vonage (VG). This is just another case of punishing the pioneers. NOBODY would be enjoying the huge advances in VOIP today if it were not for Vonage. This it the company that created enough competitive pressure on incumbent cable operators to force them to step up and offer VOIP, as well. Without that motivation, the odds of Comcast and others offering VOIP before 2010 drop precipitously. Even our good buddy Jim Cramer has dubbed the company “Vonage the Dog” and takes every opportunity to kick the dog under the table. I’ve been a very happy Vonage customer since 2002 and was among the early adopters who booted SBC for good and I’ve never looked back.

I also got burned in the VG IPO. But I’m not whining and I’m not kicking the dog. The whiners who say they didn’t have access to the prospectus are most likely lying. I accessed the site via multiple browsers, from multiple locations, and all performed perfectly. Investing in an IPO is not a free lunch ticket. Am I disappointed with the results? Of course I am. But we all knew the risk and whining when we don’t win is not the solution. There is no guarantee of winning in life, much less in investing. So take your lessons, learn, and move forward. Bail out on VG if you want to, or hold it for the long term, as I intend.

I suspect that there is much more going on behind the scenes that is causing the markets to malfunctions for VG. This is a great service, with a great growth opportunity, and analysts are not comparing apples to apples. Grudges against Citron and misconceptions about Skype are EMOTIONAL components that hurt this stock much more than anything else. Skype is not even a direct competitor, because the way that it works requires that both subscribers use Skype. Vonage allows you to directly, quickly, and easily REPLACE your existing phone service with a regular phone. No Skype USB adapters, no leaving a PC running just so you can have a phone, Vonage has absolutely NONE of the complexities of SkypeIn/Out, AIMCall-In/Out/Exception/Plugins, yada yada, not to mention the infighting between all these also-rans and the lawsuit leveled by Net2Phone against Skype.

When you plug in Vonage - IT JUST WORKS. None of the competitors even come close.

Eventually, this stuff has got to make it into the mainstream consciousness. It’s simply not okay to allow everyone to kick the dog, just because it’s become fashionable to do so. When a founder is so lost in his new company that his personality and the company become one, it’s indicative of a psychological imbalance called “founderitis.” The company is NOT an extension of the founder’s personality, but the afflicted founder acts as if it were, taking any offense against the product or service PERSONALLY. The inverse of this illness is presently affecting Vonage. The market has contracted it’s own type of founderitis, treating Vonage THE SERVICE as if it were literally, the personality of Jeff Citron. This is mental illness of the most disruptive kind and should not be tolerated in a market any more than it is tolerated in an amatuer company founder.

And shame on Cramer, for this one. Is Citron simply not in your little high-school popularity clique? I don’t know the guy personally, but I do know that he f’d up at Datek. I read that in the prospectus and decided that he had paid his dues and moved on to boldly help create a service that become the PRIMARY DISRUPTIVE FORCE in voice telecom industry. THIS, to my mind, is the most likely cause for the trouncing of Vonage. Not for anything that Vonage did wrong, but because of its SUCCESS, it seems to have been singled out by the incumbents for euthanization. That, and the market’s mental illness - dog-kicking founderitis hypocriticus.

Vonage is not a “bad dog.” Vonage is an uttterly amazing, entirely New Breed of dog. But like the hypo-allergenic kittens we’re seeing, I suspect that fear of the new and resentment and jealously of the innovative are the legs that keep kicking this dog into the corner. So go ahead and kick, but just remember how kicked dogs eventually respond; and when the response comes, I’ll have no sympathy whatsoever.

So to those who think it’s fun to kick the dog, I say, “Sick’em, Vonage! Good dog!”

Written on June 11, 2006