But domain names are a price-sensitive business, in which discounters have succeeded in capturing the lion's share of sales, at the expense of full-price registrars such as Register.com and Network Solutions. The most successful player in the domain market is currently Go Daddy, which gained nearly half a million hostnames from March to July. Go Daddy currently prices a new .com domain at $8.95 a year, just a dollar less than Yahoo.
"Anytime someone the size of Yahoo does anything, you have to pay attention," said Bob Parsons, president and founder of Go Daddy, who is keeping a careful eye on competitors. "We looked at (pricing) when 1&1 entered the U.S. market," said Parsons. When 1&1 Internet launched its American unit in January with $5.99 domains, Go Daddy lowered its .com price to $7.95 for several months. Both providers are currently offering aggressive discounts on .us domains, which are priced at $2.99 at 1&1 and $4.95 at Go Daddy.
In using cheap domains to build its hosting business, Yahoo is following a path blazed last year by Hostway and EV1Servers. Given Yahoo's tight focus on the small business hosting market, its price change is a clear challenge to $35 providers with ambitions in that space. Chief among them is Network Solutions, which cited small business customers as a major factor in its recent rebound. Company president Champ Mitchell says Network Solutions has become a safe haven for small business owners launching web sites, who are willing to pay more for a familiar brand name. "When you're talking about your web presence, a $20 difference (in domain prices) isn't a lot of money," Mitchell said in June.
Having Yahoo priced at $9.95 changes that equation. For its part, Yahoo says it doesn't anticipate further price reductions. "There are others with lower price points," said Rich Riley, vice president and general manager of Yahoo Small Business. "I think there will always be discounters."