Will Yahoo Shake Up Domain Pricing Trends?

Will Yahoo's new $9.95 domain pricing prompt any other major players to adjust their pricing? Domain prices have been stable in recent months, a trend that continued when Yahoo dropped its pricing from $35 a year for a .com registration to $14.70 in late June.

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.

Retail Domain Name Prices, August 2004
Company One-year
.com price
&nbspPrimary Business&nbsp Primary Region
1&1 Internet AG $5.99 Mixed Hosting Europe
EV1Servers $6.49 Dedicated Hosting America
Hostway $6.95 Shared Hosting America
Web.com $6.95 Mixed Hosting America
AIT Domains $6.95 Mixed Hosting America
DomainSite $6.99 Domain Registrar America
Go Daddy Inc $8.95 Domain Registrar America
Yahoo $9.95 Shared Hosting America
RegisterFly $9.99 Domain Registrar America
Dotster $14.95 Domain Registrar America
FastHosts $16.37 Mixed Hosting Europe
Pipex $16.57 Mixed Hosting Europe
eNom $29.95 Domain Registrar America
Network Solutions $34.99 Domain Registrar America
Register.com $35.00 Domain Registrar America

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."