When the rest of the domain industry increases prices by 10% because Verisign announced an overall price increase for .com domains, most of us understood the reasoning and accepted the price hike reluctantly. But when Yahoo! recently announced in March that the annual renewal price for a domain is increasing from $9.95 to $12.95 a year, a whopping 30% increase, we weren't quite sure why such an increase was warranted?!
Unfortunately this increase is effective only for those of us who had been loyal customers and need to renew our domains year after year; not for new registrations which typically benefit from reduced rates. If you look on the Yahoo Small Business site, there is no mention of the price being jacked up by 30%, and why should this be listed? That would only scare people away and that is something Melbourne IT, the registrar behind Yahoo! Domains, wants to avoid of course.
Since no explanation was given for the increase in the email we received back in March, nor on the company website, we felt that it would be interesting to examine some possible reasons...
- It's certainly not because it takes more work to renew the domains or send out the email notifications. Like eBay and other large Internet companies, Yahoo automates many of its services, and keeps customer service staff to a bare minimum.
- 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. We don't think these added costs are the direct reasons for the domain price increase either.
- 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 non-advertising income. I don't know if the new pricing scheme will really boost Yahoo's bottom line, but upsetting its domain customers is a small price to pay to help offset any dip in advertising.
- Then there is always the possibility that Yahoo's agreement with Melbourne IT, the registrar behind Yahoo! Domains could be the culprit. Is Melbourne IT getting greedy or is it indeed Yahoo!?
Either way, any serious domain investors don now use Yahoo! Domains anyway... $12.95 for a .com renewal is indeed way to high!
Source: Chief Editor writing for DomainNews.com - May 16th, 2008 Chief Editor