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Vonage Buys Nexmo in Nine-Figure Payout

May 05, 2016
By Steve Anderson - Contributing Writer

Seemingly out of nowhere, a major new development landed in the communications market, as Vonage (News - Alert)—known for its services that brought voice over Internet protocol (VoIP) access to regular users—set up an agreement to purchase communications platform-as-a-service (PaaS) provider Nexmo in a deal valued at $230 million. This is a move that may make Vonage the new king of cloud communications.

Nexmo's product line offers a range of application programming interfaces (APIs), including tools for voice and chat functions as well as messaging. Nexmo APIs have given developers the ability to introduce new chat functions without undue amounts of extra programming. Nexmo, at last report, held around 350 enterprise customers, ranging from Alibaba to Uber, letting it cover not only huge parts of the alphabet but also several separate industries. However, Nexmo is commonly regarded as being second to Twilio (News - Alert) in the field, a point that may well change with Vonage now behind it.

Given that the market for applications with communications capability included is poised to hit $8 billion just by 2018, that represents a lot of opportunity. This isn't just a move for Vonage to challenge Twilio, however; there's more going on here than first blush might suggest. Nexmo boasts a worldwide network that will likely give Vonage more room to expand, and with over 350 enterprise customers on hand, Vonage now likely has a few new contact points to offer services.

Better yet, Vonage doesn't seem to be planning layoffs as a result of the purchase, as Nexmo's co-founder and current CEO Tony Jamous will now serve as president of Nexmo under Vonage. Fellow co-founder Eric Nadalin will also be involved, along with the rest of Nexmo's 170 employees.

We've already seen Vonage cover a lot of ground in the VoIP space, and with Nexmo's network, capability and customer base behind it will help give Vonage even more room to run. For Twilio to fend off this new competition will require at least a couple exciting new developments, and a clear focus on current customer service to hold its position against possible poaching from Vonage. Twilio will have an advantage here as the incumbent—inertia is a powerful thing to try and overcome—but Vonage will have not only Nexmo's benefits but also its own, and though there will be some overlap, it's likely that Vonage can put together a value proposition that will electrify the field.

The clear winner here is the customer base, who will likely see benefits as Vonage takes on Twilio more overtly and delivers some new value into the field. It will be a while before it all boils down, but there should be some exciting results waiting.

Edited by Maurice Nagle

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