Vonage: Cash For VoIP Converts

It is hard to escape the catchy jingles behind the TV ads, or the banners that festoon countless Web sites promoting Voice over IP service from VC darling Vonage.

Now, the VoIP provider is taking out its checkbook as part of its cover-the-earth approach to marketing its service.

Beginning Jan. 1 and running through the month, the Holmdel, New Jersey-based company is offering a $100 mail-in-rebate on certified VoIP phone devices sold in over 9,000 retail locations within the U.S. Vonage has 1.2 million customers and is the nation's largest provider of phone service that sends calls over Internet.

That's right, buy a $60 device, net yourself a cool $40. Of course you'd still have to sign up for the service -- prices range from $14.99 per month to $24.99 per month -- but Vonage is banking you're already paying someone else to place calls so why not put a little cash in your pocket and place them over their lines?

"We don't do anything that we think is going to lose money," Matthew Deatrick, senior vice president of sales at Vonage, said. "That is not the intention of the promotion."

Deatrick says the rebate campaign is a straight promotions move, and that the company hoped for a 20 percent "lift" from the rebate plan.

Deatrick said the company uses a lot of different methods to provide funding for promotions. Although he wouldn't supply any actual numbers, he did say that Vonage could not carry out these promotions without their OEM partners and retail support.

Translation: They aren't losing money by giving rebates on the hardware. They don't even own that.

Vonage recently landed an additional $250 million in private funding from previous and new investors, bringing the total funding war chest of the Internet-based phone service start-up to $658 million.

More branding can be expected.

Vonage has long spent considerable sums in marketing, plastering ads across the Internet, much the same way AOL used to plaster the earth with those CDs back in the day. And with the latest infusion of cash, the firm certainly can afford to spend more on advertising. Vonage also plans to use the money to develop its network throughout the United States.

Good idea, because some of the big boys are trying to muscle in on VoIP turf. Last month Microsoft announced it had purchasedprivately held media-streams.com to add Voice over IP capabilities to Office applications and servers. And just last week, Microsoft announced its software users can soon make Internet calls to standard phones thanks to a new partnership with MCI.

Vonage also faces competition from Yahoo and Skype among others.