The filing showed improved financial performance, but the magnitude of the change once again raises the question: Is Vonage worth what the company is asking, and will Wall Street respond enthusiastically to the offering?

The improvement in the company’s financials are most strongly reflected in lower losses, down to $72.8 million in the first quarter of 2006 compared to a loss of $261.3 million for the same period in 2005. Revenue for the first quarter of 2006 was $118.9 million compared to $40.7 million in revenue for the same period in 2005. The number of subscribers more than doubled year over year, from 639,899 in the first quarter of 2005 to 1,597,317 subscribers in the first quarter of 2006. Therefore, Vonage at least seems to have the potential to achieve profitability as it grows its subscriber base and revenue.

Growing that subscriber base by whatever means possible has been the central strategy for Vonage. Analyst have speculated that the company spends as much as $400 or $500 to acquire each subscriber, though the company’s own figures are just above $200 per subscriber. The marketing spend was $55.4 million for the first quarter of 2005 versus $88.3 million for the first quarter of 2006. Vonage is the largest single advertiser on the Internet, and its advertising is ubiquitous, sometimes appearing, amusingly, even beside articles critical of VoIP.

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