Time Magazine's Top 10 Tech Failures - Vonage?

Here's an item that's bound to get a few people going. Top 10 lists are everywhere, and we all know their real purpose is to start a conversation since people rarely agree on these things. On that count, Time Magazine has succeeded. They just came out with a new list - "10 Biggest Tech Failures of the Last Decade". How can that NOT get your attention, right?

I don't normally read Time, but two paths led me here. First was Andy Abramson's post from today. He and I basically agree, and I'll amplify his thought a bit in a moment. The second is my son Max, who for some reason has recently started reading Time. Great to see him following the news of the world, since - like most teenagers - he doesn't read the local paper and hardly watches TV. Your guess is as good as mine as to why he'll pick one form of mainstream media over another, but at least he's reading. That's definitely another topic --- but not now.

Anyhow, their top 10 list is an attention-grabber, and includes some expected flops like Vista, Iridium, satellite radio, and yes, YouTube. Hard to argue with these, but seeing Vonage on that list certainly caught my eye.

I totally agree with Andy that Vonage was a disaster as an investment story, but we would both strongly disagree it was a tech failure. This is how these top 10 lists suck you in - we can't resist when winners and losers are identified in the media. Tech has been a dirty word on Wall Street lately, so we love reading about "failures". Reading over the criteria that define's Time's list, there's a disconnect to me between a company or a product failing and the technology itself failing.

Would Vista be considered a failure? As a product, probably - but Microsoft is doing just fine as a company(arguably), and no one would dispute how successful their desktop OS has been. Sirius XM - no argument there. The company is not a success and satellite radio has not taken over the world. The underlying technology isn't really the story here - it's really about a new business model to monetize radio. On and on we go - it would fun analyzing each one of these, but that's not why I'm doing this.

Let's just move on to Vonage. Has the company been a failure? I'd have to say yes, and you don't have to look far for supporting evidence on a financial basis. Sure, they're still operating, and they just shifted their marketing strategy to voice quality instead of price. It's probably too little too late, but at least they're trying. Has the product been a failure? I would say no. Today, Vonage is a solid, mainstream residential VoIP service. It's not the best, it's not the cheapest, and it's not the most cutting-edge.

However, it's got great brand recognition, a track record, a critical mass of customers, and for consumers, it works pretty well. That's not a failure in my books. As far as pure-play VoIP offerings go, they're pretty much the last one standing in the U.S. While they've probably peaked in terms of subscribers, they wouldn't still have 2.6 million customers - in spite of all the nasty litigation and value-priced Triple Play bundles out there - if the product was not fundamentally sound.

This brings me to the third aspect that defines "failure" - technology. Here's where I would object the loudest and longest. I've followed Vonage longer than almost anybody (and am on record as one of their staunchest supporters). This is where I think Time has got it wrong. When Vonage went public, they owned the residential VoIP market, and had over 50% share for a long while. There is absolutely no doubt they did more than anyone to build the foundation for VoIP in the U.S. I've long called Vonage the Kleenex of VoIP - the two words are synonymous. Without Vonage, we wouldn't have a consumer VoIP market, and guess what, they've outlasted CallVantage.

When Vonage started making noise in 2004, the RBOCs - as they were called then - got very nervous as the media was trumpeting the likes of Vonage as the successors to dinosaur telcos that would make them obsolete. This led AT&T to engage in an aggressive marketing campaign to compete head-to-head with their CallVantage service. A price war ensued, with the incumbents hoping this would drive Vonage out. It failed, and ultimately, AT&T was acquired by one of its offspring - SBC - for an embarrasingly low amount of money. It's a much different story today, but at the time, it sure looked like Vonage was going to kill the telcos. Fast forward to today, and you could argue that VoIP has failed as a technology because for all its effort, Vonage, barely has 3% of the market.

Sure, that's laughable, but if you don't think VoIP is the future of telephony - not just residential - then you probably think Iridium, Vista, HD DVD, and the rest of Time's top 10 list still have a chance. Vonage may have topped out as a market player, but they've long conceded that the cablecos now own the consumer VoIP space. While most of the growth in consumer telephony is wireless, there are still around 90 million landlines out there in the U.S., and there's no doubt that VoIP is going to become dominant there. And guess what - once we get LTE, WiMax, 4G etc. up and running, VoIP will do to mobility what's it's done to landline. I could go on, but I'm sure you get the idea. So, thanks Time for getting my attention, and next time, please be more careful - or consistent - in making these choices.