##### 



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-Q
  QUARTERLY REPORT PURSUANT TO
    SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the Quarter Ended March 31, 2007
    Commission File Number
    000-51644
  Vocus, Inc.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Delaware

58-1806705(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)   4296 Forbes Boulevard
    Lanham, Maryland 20706(301) 459-2590
 (Address including zip code, and
    telephone number,
 including area code, of
    principal executive offices)
    þ o
  Rule 12b-2
 o þ o
  Rule 12b-2
 o þ




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TABLE OF
    CONTENTS
  PagePART I 
    FINANCIAL INFORMATIONItem 1.


Consolidated
    Financial Statements


3Consolidated
    Balance Sheets as of December 31, 2006 and March 31,
    2007


3Consolidated
    Statements of Operations for the three months ended
    March 31, 2006 and 2007


4Consolidated
    Statements of Cash Flows for the three months ended
    March 31, 2006 and 2007


5Notes to
    Consolidated Financial Statements


6Item 2.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


12Item 3.


Quantitative and
    Qualitative Disclosures about Market Risk


18Item 4.


Controls and
    Procedures


18PART II 
    OTHER INFORMATIONItem 1.


Legal
    Proceedings


18Item 1A.


Risk
    Factors


18Item 2.


Unregistered Sales
    of Equity Securities and Use of Proceeds


29Item 6.


Exhibits


30SIGNATURES


31  2




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##### 



PART I  Item 1.
    Consolidated
    Financial Statements  Vocus,
    Inc. and Subsidiaries
  Consolidated
    Balance Sheets
  December 31,


March 31,2006


2007(Unaudited)(Dollars in thousands, except per share data)ASSETSCurrent assets:Cash and cash equivalents

$
26,506


$
28,774Short-term investments


3,357



4,155Accounts receivable, net of
    allowance for doubtful accounts of $280 and $273 at
    December 31, 2006 and March 31, 2007, respectively


10,139



7,341Prepaid royalty fees


415



506Other current assets


731



1,181Total current assets


41,148



41,957Property, equipment and software,
    net


4,359



4,722Intangible assets:Customer relationships, net


4,115



3,728Trade name, net


3,717



3,576Agreements
    not-to-compete,
    net


3,587



3,392Purchased technology, net


191



161Intangible assets, net


11,610



10,857Goodwill


17,112



17,112Other assets


541



718Total assets

$
74,770


$
75,366LIABILITIES, REDEEMABLE STOCK
    AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
1,459


$
1,010Accrued compensation


2,054



1,552Accrued expenses


2,587



2,515Current portion of notes payable
    and capital lease obligations


427



383Current portion of deferred revenue


26,100



26,604Total current liabilities


32,627



32,064Notes payable and capital lease
    obligations, net of current portion


335



251Deferred income taxes


185



185Other liabilities


85



85Deferred revenue, net of current
    portion


531



315Total liabilities


33,763



32,900Redeemable common stock,
    $0.01 par value, 5,000 shares issued and outstanding
    at December 31, 2006 and March 31, 2007


33



34Commitments and contingencies






Stockholders equity:Preferred stock, $0.01 par
    value, 10,000,000 shares authorized; no shares issued and
    outstanding at December 31, 2006 and March 31, 2007






Common stock, $0.01 par
    value, 90,000,000 shares authorized; 16,993,515 and
    17,042,109 shares issued at December 31, 2006 and
    March 31, 2007, respectively; 15,982,738 and
    16,031,332 shares outstanding at December 31, 2006 and
    March 31, 2007, respectively


170



170Additional paid-in capital


80,526



81,984Treasury stock,
    1,010,777 shares at cost


(3,283
)


(3,283
)Accumulated other comprehensive
    loss


(48
)


(50
)Accumulated deficit


(36,391
)


(36,389
)Total stockholders equity


40,974



42,432Total liabilities, redeemable
    stock and stockholders equity

$
74,770


$
75,366    3




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Vocus,
    Inc. and Subsidiaries
  Consolidated
    Statements of Operations
  Three months Ended March 31,2006


2007(Unaudited)(Dollars in thousands, except per share data)Revenues

$
8,262


$
12,597Cost of revenues, including
    amortization expense of $89 and $30 for the three months ended
    March 31, 2006 and 2007, respectively


1,962



2,480Gross profit


6,300



10,117Operating expenses:Sales and marketing


4,005



5,611Research and development


739



745General and administrative


1,927



3,408Amortization of intangible assets


261



723Total operating expenses


6,932



10,487Loss from operations


(632
)


(370
)Other income (expense):Interest and other income


503



387Interest expense


(21
)


(15
)Total other income


482



372Income (loss) before provision for
    income taxes


(150
)


2Provision for income taxes


32



Net income (loss)

$
(182
)

$
2Net income (loss) per share:Basic

$
(0.01
)

$
0.00Diluted

$
(0.01
)

$
0.00Weighted average shares
    outstanding used in computing per share amounts:Basic


14,965,271



16,016,478Diluted


14,965,271



16,598,471    4




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Vocus,
    Inc. and Subsidiaries
  Consolidated
    Statements of Cash Flows
  Three Months Ended March 31,2006


2007(Unaudited)(Dollars in thousands)Cash flows from operating
    activities:Net income (loss)

$
(182
)

$
2Adjustments to reconcile net
    income (loss) to net cash provided by operating activities:Depreciation and amortization of
    property, equipment and software


275



337Amortization of intangible assets


350



753Gain on disposal of assets






(16
)Gain on short-term investments






(3
)Stock-based compensation


378



1,250Provision for doubtful accounts


8



48Changes in operating assets and
    liabilities:Accounts receivable


1,263



2,752Prepaid royalty fees


2



(91
)Other current assets


(183
)


(451
)Other assets


(17
)


(24
)Accounts payable


50



(499
)Accrued compensation


(324
)


(482
)Accrued expenses


(95
)


(93
)Deferred revenue


643



285Other liabilities


5



Net cash provided by operating
    activities


2,173



3,768Cash flows from investing
    activities:Purchases of short-term investments


(2,000
)


(1,924
)Maturities of short-term
    investments






1,131Software development costs


(10
)


(247
)Purchases of property and equipment


(122
)


(453
)Proceeds from disposal of assets






16Net cash used in investing
    activities


(2,132
)


(1,477
)Cash flows from financing
    activities:Public offering costs






(103
)Proceeds from exercise of stock
    options


161



209Payments on notes payable and
    capital lease obligations


(123
)


(128
)Net cash provided by (used in)
    financing activities


38



(22
)Effect of exchange rate changes on
    cash and cash equivalents


3



(1
)Net increase in cash and cash
    equivalents


82



2,268Cash and cash equivalents,
    beginning of period


40,027



26,506Cash and cash equivalents, end of
    period

$
40,109


$
28,774    5




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Vocus,
    Inc. and Subsidiaries
  Notes
    to Consolidated Financial Statements
  1.
    Business
    Description  Organization
    and Description of Business
    2.
    Summary
    of Significant Accounting Policies  Basis
    of Presentation
  Form 10-Q Regulation S-X. 10-K
  Principles
    of Consolidation
    Use of
    Estimates
    Impairment
    of Long-Lived Assets
  Accounting for the Impairment or Disposal of
    Long-Lived Assets
 6




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Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Goodwill
  Goodwill and Other Intangible Assets
  Revenue
    Recognition
      No. 00-21, Revenue Arrangements with Multiple Deliverables 00-21),
      Sales
    Commissions
    Income
    Taxes
   7




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Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Net
    Income (Loss) Per Share
      Three Months EndedMarch 31,2006


2007Net income (loss)

$
(182
)

$
2Weighted average shares
    outstanding, basic


14,965,271



16,016,478Dilutive effect of:Options to purchase common stock






411,752Warrants to purchase common stock






170,241Weighted average shares
    outstanding, diluted


14,965,271



16,598,471Net income (loss) per share:Basic

$
(0.01
)

$
0.00Diluted

$
(0.01
)

$
0.00     Three Months EndedMarch 31,2006


2007Options to purchase common stock


2,306,109



3,586,615Warrants to purchase common stock


361,446



225,520Total options and warrants
    convertible into common stock


2,667,555



3,812,135   Recent
    Accounting Pronouncements
  The Fair Value Option for Financial Assets and
    Financial Liabilities
  Fair Value Measurements
 8




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Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Accounting for Uncertainty in Income Taxes
  No. 06-3, How Sales Taxes Collected from Customers and Remitted to
    Governmental Authorities Should Be Presented in the Income
    Statement (That is, Gross Versus Net Presentation) 06-3).
  3.
    Stock-Based
    Compensation  Share-Based
    Payment
  Three Months EndedMarch 31,2006


2007Cost of revenues

$
19


$
115Sales and marketing


71



326Research and development


53



110General and administration


232



587Total

$
375


$
1,138       Three Months EndedMarch 31,2006


2007Stock price volatility


55
%


51
%Expected term (years)


6.3



6.2Risk-free interest rate


4.6
%


4.8
%Dividend yield


0
%


0
%  9




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Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Weighted-





AggregateAverage


Weighted-


IntrinsicExercise


Average


Value as ofNumber of


Price per


Contractual


March 31,Options


Share


Term


2007(In thousands)Balance outstanding at
    December 31, 2006


2,205,351


$
8.26Granted


1,433,250



18.73Exercised


(44,069
)


4.73Forfeited or cancelled


(7,917
)


9.07Balance outstanding at
    March 31, 2007


3,586,615


$
12.49



8.8


$
27,468Expected to vest at March 31,
    2007


3,347,954


$
12.37



8.8


$
25,990Exercisable at March 31, 2007


663,740


$
5.94



7.0


$
9,419         4.
    Income
    Taxes     10




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Vocus,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
      5.
    Commitments
    and Contingencies    6.
    Subsequent
    Event  Public
    Offering of Common Stock
   11




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Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following discussion and analysis of our financial
    condition and results of operations should be read in
    conjunction with our consolidated financial statements and
    related notes that appear elsewhere in this report and in our
    annual report on
    Form 10-K
    for the year ended December 31, 2006.
  This report includes forward-looking statements that are made
    pursuant to the safe harbor provisions of the Private Securities
    Litigation Reform Act of 1995. These forward-looking statements
    can be identified by the use of words such as
    anticipate, believe,
    estimate, may, intend,
    expect, will, should,
    seeks or other similar expressions. Forward-looking
    statements reflect our plans, expectations and beliefs, and
    involve inherent risks and uncertainties, many of which are
    beyond our control. You should not place undue reliance on any
    forward-looking statement, which speaks only as of the date
    made. Our actual results could differ materially from those
    discussed in the forward-looking statements. Factors that could
    cause or contribute to these differences include those discussed
    below and elsewhere in this report, particularly in Risk
    Factors in Item 1A of Part II.
  Overview
    not-for-profit
      Sources
    of Revenues
   12




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and/or
    Cost of
    Revenues and Operating Expenses
  Cost of Revenues.
    Sales and Marketing.
    Research and Development.
  General and Administrative.
 13




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Amortization of Intangible Assets. not-to-compete
  Critical
    Accounting Policies
    Form 10-K
  Revenue Recognition. Revenue Recognition in Financial Statements Revenue
    Recognition
    No. 00-21, Revenue Arrangements with Multiple Deliverables 00-21),
    Stock-Based Compensation.
 14




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Impairment of Long-Lived Assets.
  Goodwill.
  Results
    of Operations
    Three MonthsEnded March 31,2006


2007Revenues


100
%


100
%Cost of revenues


24



20Gross profit


76



80Operating expenses:Sales and marketing


49



44Research and development


9



6General and administrative


23



27Amortization of intangible assets


3



6Total operating expenses


84



83Loss from operations


(8
)


(3
)Other income, net


6



3Income (loss) before provision for
    income taxes


(2
)


Provision for income taxes






Net income (loss)


(2
)%



%  15




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Three MonthsEndedMarch 31,2006


2007Total deferred revenue (in
    thousands at end of period)

$
21,346


$
26,919Net cash provided by operating
    activities (in thousands)

$
2,173


$
3,768Active customers


1,447



1,832   Three
    Months Ended March 31, 2007 and 2006
  Revenues.
  Cost of Revenues.
  Sales and Marketing Expenses.
  Research and Development Expenses.
  General and Administrative Expenses.
 16




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Amortization of Intangible
    Assets.
  Other Income (Expense).
  Provision for Income Taxes.
  Liquidity
    and Capital Resources
           17




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Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk  Form 10-K
  Item 4.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e) Form 10-Q Form 10-Q.
    Changes
    in Internal Controls
   PART II  Item 1.
    Legal
    Proceedings    Item 1A.
    Risk
    Factors    Risks
    Related to Our Business and Industry
  The
    markets for our on-demand software and solutions are emerging,
    which makes it difficult to evaluate our business and future
    prospects and may increase the risk of your
    investment.
   18




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
    generating sufficient revenue to maintain profitability;
    managing growth in our operations;
    managing the risks associated with developing new services and
    modules;
    attracting and retaining customers; and
    attracting and retaining key personnel.    If our
    on-demand solutions are not widely accepted, our business will
    be harmed.
    A
    substantial majority of our on-demand solutions are sold
    pursuant to subscription agreements, and if our existing
    subscription customers elect either not to renew these
    agreements or renew these agreements for fewer modules or users,
    our business, financial condition and results of operations will
    be adversely affected.
    Because
    we recognize subscription revenue over the term of the
    applicable subscription agreement, the lack of subscription
    renewals or new subscription agreements may not be immediately
    reflected in our operating results.
   19




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Our
    business model continues to evolve, which may cause our results
    of operations to fluctuate or decline.
    We
    might not generate increased business from our current
    customers, which could limit our revenue in the
    future.
    If our
    information database does not maintain market acceptance, our
    business, financial condition and results of operations could be
    adversely affected.
    We
    have incurred operating losses in the past and may incur
    operating losses in the future.
    Our
    quarterly results of operations may fluctuate in the future. As
    a result, we may fail to meet or exceed the expectations of
    investors or securities analysts which could cause our stock
    price to decline.
    
    our ability to retain and increase sales to existing customers
    and attract new customers;  
    changes in the volume and mix of subscriptions sold and press
    releases distributed in a particular quarter;  
    seasonality of our business cycle, given that our subscription
    volumes are normally lowest in the first quarter and highest in
    the fourth quarter;  20




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
    our policy of expensing sales commissions at the time our
    customers are invoiced for a subscription agreement, while the
    majority of our revenue is recognized ratably over future
    periods;  
    the timing and success of new product introductions or upgrades
    by us or our competitors;  
    changes in our pricing policies or those of our competitors;  
    the amount and timing of expenditures related to expanding our
    operations;  
    changes in accounting policies or the timing of non-recurring
    charges;  
    changes in the payment terms for our products and services; and  
    the purchasing and budgeting cycles of our customers.    quarter-to-quarter
  We
    face competition, and our failure to compete successfully could
    make it difficult for us to add and retain customers and could
    reduce or impede the growth of our business.
    
    PR solution providers offering products specifically designed
    for PR;
    generic desktop software and other commercially available
    software not specifically designed for PR;
    outsourced PR service providers; and
    custom-developed solutions.     21




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If we
    fail to respond to evolving industry standards, our on-demand
    solutions may become obsolete or less competitive.
    If
    there are interruptions or delays in providing our on-demand
    solutions due to third-party error, our own error or the
    occurrence of unforeseeable events, delivery of our solutions
    could become impaired, which could harm our relationships with
    customers and subject us to liability.
        The
    market for our solutions among large customers may be limited if
    they require customized features or functions that we do not
    currently intend to provide in our solutions or that would be
    difficult for individual customers to customize within our
    solutions.
   22




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Acquisitions
    could prove difficult to integrate, disrupt our business, dilute
    stockholder value and consume resources that are necessary to
    sustain our business.
    
    issue additional equity securities that would dilute the
    ownership of our stockholders;
    use cash that we may need in the future to operate our business;
    incur or assume debt on terms unfavorable to us or that we are
    unable to repay;
    incur large charges or substantial liabilities;
    encounter difficulties retaining key employees of an acquired
    company or integrating diverse business cultures; and
    become subject to adverse tax consequences, substantial
    depreciation or deferred compensation charges.    Failure
    to effectively develop and expand our sales and marketing
    capabilities could harm our ability to increase our customer
    base and achieve broader market acceptance of our
    solutions.
    If we
    fail to develop our brands cost-effectively, our business may
    suffer.
   23




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We may
    be liable to our customers and may lose customers if we provide
    poor service, if our solutions do not comply with our agreements
    or if there is a loss of data.
      If our
    solutions fail to perform properly or if they contain technical
    defects, our reputation will be harmed, our market share would
    decline and we could be subject to product liability
    claims.
      Changes
    in laws
    and/or
    regulations related to the Internet or changes in the Internet
    infrastructure itself may cause our business to
    suffer.
   24




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If we
    are unable to protect our proprietary technology and other
    intellectual property rights, it will reduce our ability to
    compete for business.
      If a
    third-party asserts that we are infringing its intellectual
    property, whether successful or not, it could subject us to
    costly and time-consuming litigation or expensive licenses, and
    our business may be harmed.
    
    divert managements attention;
    result in costly and time-consuming litigation;
    require us to enter into royalty or licensing agreements, which
    may not be available on acceptable terms, or at all; or  
    require us to redesign our solutions to avoid infringement.   25




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Our
    growth could strain our personnel and infrastructure resources,
    and if we are unable to implement appropriate controls and
    procedures to manage our growth, we may not be able to
    successfully implement our business plan.
      We are
    dependent on our executive officers, and the loss of any of them
    may prevent us from implementing our business plan in a timely
    manner if at all.
    We may
    not be able to attract and retain the highly skilled employees
    we need to support our planned growth.
   26




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Because
    we conduct operations in foreign jurisdictions, which accounted
    for approximately 7% of our 2006 revenues, and because our
    business strategy includes expanding our international
    operations, our business is susceptible to risks associated with
    international operations.
    
    fluctuations in currency exchange rates;
    unexpected changes in foreign regulatory requirements;
    difficulties in managing and staffing international operations;
    potentially adverse tax consequences, including the complexities
    of foreign value added tax systems and restrictions on the
    repatriation of earnings; and
    the burdens of complying with a wide variety of foreign laws and
    different legal standards.    We
    might require additional capital to support business growth, and
    this capital might not be available.
    Our
    reported financial results may be adversely affected by changes
    in accounting principles generally accepted in the United
    States.
    Compliance
    with new regulations governing public company corporate
    governance and reporting is uncertain and
    expensive.
   27




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Risks
    Related to our Common Stock and the Securities Markets
  If
    securities analysts do not publish research or reports about our
    business or if they downgrade our stock, the price of our stock
    could decline.
    Volatility
    of our stock price could adversely affect
    stockholders.
    
    quarterly variations in our operating results;
    seasonality of our business cycle;
    interest rate changes;
    changes in the markets expectations about our operating
    results;
    our operating results failing to meet the expectation of
    securities analysts or investors in a particular period;
    changes in financial estimates and recommendations by securities
    analysts concerning our company or the on-demand software
    industry in general;
    operating and stock price performance of other companies that
    investors deem comparable to us;
    news reports relating to trends in our markets;
    changes in laws and regulations affecting our business;
    material announcements by us or our competitors;
    sales of substantial amounts of common stock by our directors,
    executive officers or significant stockholders or the perception
    that such sales could occur; and
    general economic and political conditions such as recessions and
    acts of war or terrorism.  The
    concentration of our capital stock ownership with insiders will
    likely limit your ability to influence corporate
    matters.
   28




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Provisions
    in our amended and restated certificate of incorporation and
    bylaws or Delaware law might discourage, delay or prevent a
    change of control of our company or changes in our management
    and, therefore, depress the trading price of our
    stock.
    
    establish a classified board of directors so that not all
    members of our board of directors are elected at one time;
    provide that directors may only be removed for cause
    and only with the approval of 66 2 / 3 percent of our
    stockholders;
    require super-majority voting to amend our bylaws or specified
    provisions in our amended and restated certificate of
    incorporation;
    authorize the issuance of blank check preferred
    stock that our board of directors could issue to increase the
    number of outstanding shares and to discourage a takeover
    attempt;
    limit the ability of our stockholders to call special meetings
    of stockholders;
    prohibit stockholder action by written consent, which requires
    all stockholder actions to be taken at a meeting of our
    stockholders;
    provide that the board of directors is expressly authorized to
    adopt, amend, or repeal our bylaws; and
    establish advance notice requirements for nominations for
    election to our board of directors or for proposing matters that
    can be acted upon by stockholders at stockholder meetings.    Future
    sales, or the availability for sale, of our common stock may
    cause our stock price to decline.
  Rule 10b5-1
  Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds  Sale of
    Unregistered Securities
    Use of
    Proceeds
  Form S-1 333-125834),
 29




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Item 6.
    Exhibits  ExhibitNumber

Exhibit3
.1

Fifth Amended and Restated
    Certificate of Incorporation.(1)3
.2

Amended and Restated Bylaws.(1)31
.1*

Certification of Chairman and
    Chief Executive Officer pursuant to
    Rule 13a-14(a)
    and
    Rule 15d-14(a),
    promulgated under the Securities Exchange Act of 1934, as
    amended.31
.2*

Certification of Chief Financial
    Officer pursuant to
    Rule 13a-14(a)
    and
    Rule 15d-14(a),
    promulgated under the Securities Act of 1934, as amended.32
.1*

Certification of Chairman and
    Chief Executive Officer and Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.     *
    
    Filed herewith(1)
    
    Incorporated by reference to an exhibit to the Registration
    Statement on
    Form S-8
    of Vocus, Inc. (Registration
    No. 333-132206)
    filed with the Securities and Exchange Commission on
    March 3, 2006. 30




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SIGNATURES      By:
    /s/  Richard
    Rudman      By:
    /s/  Stephen
    Vintz       31




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INDEX TO
    EXHIBITS
  ExhibitNumber

Exhibit3
.1

Fifth Amended and Restated
    Certificate of Incorporation.(1)3
.2

Amended and Restated Bylaws.(1)31
.1*

Certification of Chairman and
    Chief Executive Officer pursuant to
    Rule 13a-14(a)
    and
    Rule 15d-14(a),
    promulgated under the Securities Exchange Act of 1934, as
    amended.31
.2*

Certification of Chief Financial
    Officer pursuant to
    Rule 13a-14(a)
    and
    Rule 15d-14(a),
    promulgated under the Securities Act of 1934, as amended.32
.1*

Certification of Chairman and
    Chief Executive Officer and Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.     *
    
    Filed herewith(1)
    
    Incorporated by reference to an exhibit to the Registration
    Statement on
    Form S-8
    of Vocus, Inc. (Registration
    No. 333-132206)
    filed with the Securities and Exchange Commission on
    March 3, 2006.