Opinion: Why is Yahoo boosting domain fees by 30%?

Like many people, I "own" a few personal domains for my blogs and a few old business ideas that never got off the ground. And, like many people, they have been parked at Yahoo Small Business, partially because I already had a Yahoo account when I registered them a few years ago, and partially because I was lured by the $1.99/year offers for new domains that Yahoo had running at the time. The rate increased to $9.95 after the first year, but I was OK with that. I was able to reserve the domains and set up redirects to my blogs, and have the option of building real sites if I ever get too frustrated with Google's Blogger service.

Now I find out in an e-mail from Yahoo that the annual domain "renewal price" has increased by 30%, to $12.95 year.

Mind you, this isn't for new domains. It's only for existing ones, owned by loyal customers like me. If you look on the Yahoo Small Business site, there isn't any mention of the price being jacked up by 30%, and why should this be listed? That would only scare people away!

There was no explanation for the increase in the e-mail I received or on the company Web site, so let's examine some possible reasons.

It's certainly not because it takes more work to renew the domains or send out the e-mail notifications. Like eBay and other large Internet companies, Yahoo automates many of its services, and keeps customer service staff to a bare minimum.

What are some other potential reasons? Consider the effective date of the price increase: March 11, 2008. As you may recall, this was when the company was in a tight spot. It was just one month after Yahoo announced a "lavish" employee retention and severance program in the wake of Microsoft's bid for the company, and about six weeks before it attempted to justify various salary increases and bonuses for senior executives, including President Sue Decker's $1.1 million bonus for 2007.

But I don't think these added costs are the direct reasons for the domain price increase. A primary source of Yahoo's profit is advertising, and while revenue increased in the first quarter, the company said it experienced weakness in sectors such as finance, travel and retail. If this weakness persists throughout the year -- a possible scenario, considering all of the negative economic news we've been hearing, and the rapid increase in online advertising inventory from social networks and other sites -- Yahoo will have to depend more on nonadvertising income. I don't know if the new pricing scheme will really boost Yahoo's bottom line, but pissing off its domain customers is a small price to pay to help offset any dip in advertising.

Copyright © 2008 IDG Communications, Inc.

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