A few months back, we were asked by a company sitting on the Vonage IPO what we thought of the company’s strategy. Our thoughts at the time (and they haven’t really changed) were that it was a very tough investment – Vonage has had an early mover advantage, but no real ongoing technical or other differentiation.

We were also asked what we thought of Vonage as an acquisition candidate. Our response was simple: what are you acquiring? The answer is “a customer base.” But does the acquisition get you get a base that sticks around? Unlike many other service providers, customers went with Vonage for two reasons: first, because they were disgruntled with their incumbent service providers, and second, because of the price. Unfortunately, these both things that customers will move again for.

On top of all this – and we hate to pile on – we tried the service for our own virtual office needs, and it wasn’t really business class, or even SOHO class . We had to deal with dropped calls, bad links, etc. – all of the concerns that over-the-top services bring to the table. For residential users it was fine, but it seemed to us that if another provider popped up with a better service that costs the same, users would switch.

These conversations took place before the IPO – and if you’ve been following the business press or stock prices since then, you’ve seen that the market has some pretty similar thoughts and concerns.

So what would we do if we were running things at Vonage – or advising them? (And we want to note that we’re not advising them, so perhaps some of these things are already in the works – we’re going on what’s publicly known.)

At the highest level, we think that for Vonage to succeed long term and not bleed as much as they are bleeding now , they need to have three things: a focus, an attitude and a true differentiation…

First, focus. Today, you could say Vonage is focused on VoIP, but that’s too narrow to sustain the burn rate. Voice is Vonage’s focus, and it’s just been a brutal market for 20 years now. Heck, voice is essentially given away for free for taking IPTV, data services, 4G wireless, etc.

And for over-the-top services like Vonage, free is truly the wave of the future. EBay recently launched free Skype Out services for the U.S. and Canada – you can’t get much freer than that, and you can easily mix in an inexpensive Skype phone to get away from your computer when using this service.