Yahoo Leverages Falling Storage Prices To Offer $12 Unlimited Hosting Deal

Leveraging plummeting memory prices and the "monstrous scale" with which Yahoo buys, the Web portal player introduced Wednesday a $12/month Web hosting plan that promises "unlimited" disk space, data transfers and E-mail storage space, a Yahoo executive said.

The Yahoo deal suffers from the same shortcoming that hangs over so many "unlimited" offerings, namely that there truly is some kind of a limit but that customers won't learn what those limits are until after they've bought and started using the service.

Guy Yalif, Yahoo's director of web hosting products, said that Yahoo truly thinks the service will be unlimited for most "small businesses," but Yalif refused to say how Yahoo will define a small business, other than to say that it will not be based on the number of employees.

"We will place some constraints on how fast the site can grow," Yalif said, refusing to specify what Yahoo will consider excessively rapid growth. "It will be situationally specific."

Yalif defended the lack of specifics, saying Yahoo wanted to make sure that spammers or other ill-intentioned people didn't game the system by maxing out, just up to the point of Yahoo's limit. Although that's a legitimate concern, it's still essential to tell a customer upfront what their limits are. After all, if a customer needs to grow too quickly for Yahoo's taste, best that the customer learn about it before he's transitioned to the new host site.

Setting aside the secrecy of the limitations, the service specs released do sound compelling.

"By going unlimited, Yahoo is freeing its customers to focus on growing their businesses and driving traffic to their sites, rather than calculating the costs of Mbytes,"Yalif said.

The package includes 24x7 phone and E-mail tech support, but Yalif wouldn't say if that included overseas support. It also features one free domain name, 1,000 E-mail addresses a 30-day money-back guarantee. Customers are required, though, to purchase the hosting service three months at a time, making it $36 for three months.

Yalif said Yahoo has dedicated a lot of storage to this project—"in the Petabyte range"—and that it will be a shared hosting service, which means that performance could deteriorate if some other site on the shared server does something especially bandwidth intensive.

How can Yahoo afford this offer? Aside from the fact that it is hoping new customers will want to upgrade to additional services, Yalif said Yahoo could make a profit even with an unlimited $11.95 plan such as this one. "Prices have come down dramatically" and when a company "buys at the monstrous scale that Yahoo does," prices are even lower, Yalif said.

Will this have a material impact on E-Commerce? Most likely not, as most companies that want to be online are already there. This offer will, however, likely appeal to very small mom-and-pops that haven't come online yet, as well as veteran E-Commerce small outfits that will explore it as a lower-cost alternative.