Yahoo Serves Up All-You-Can-Eat Hosting Buffet

Yahoo has sweetened the pot for small and midsize businesses with an all-you-can-eat plan.

On Feb. 6, Yahoo introduced a flat-rate Web hosting plan called Yahoo Web Hosting. The monthly price of $11.95 includes unlimited disk space, data transfer and e-mail storage, as well as Web site design tools, a free domain name, 1,000 personalized e-mail accounts and live 24/7 customer support.

Guy Yalif, Yahoo's director of Web hosting products, said in a statement that the new offering reiterates the company's commitment to small businesses.

The plan replaces Yahoo's previous Web hosting service, for which companies paid $11.95, $24.95 or $34.95 per month depending on capacity.

Microsoft offers a similar plan, Microsoft Office Live Small Business. The free version offers a domain name, Web site and e-mail account, as well as 500MB of Web site storage space and 25 company-branded e-mail accounts.

For $19.95 per month, businesses get 1GB of storage space and 50 company-branded e-mail accounts, while the premium version, at $39.95 per month, increases storage to 2GB and adds access from mobile phones and other features. Yahoo's competitors, such as GoDaddy.com, offer similar plans.

Click here to read about what a Microsoft-Yahoo merger could mean for SMB security. 

Because Microsoft's basic offering is free, Yahoo is carving out a unique strategy, said Sonal Gandhi, an analyst at JupiterResearch.

"Microsoft's strategy is to get you to build a Web site for free and, as your needs grow, start paying for additional disk space and business applications," Gandhi said. "This levels the playing field between [Yahoo and Microsoft]."

Although some consider Google Apps an eventual competitor, it's too early to consider its offerings competitive, said Sanjeev Aggarwal, a vice president at AMI-Partners (Access Markets International Partners), a consulting firm that focuses on the SMB market. Google's applications are still in the beta phase, and most are more consumer-oriented, he said.

But now is a good time for Yahoo to change its model, Aggarwal said. Yahoo's pricing is still profitable because the costs of storage and bandwidth have declined significantly in the past few years, and it's likely to attract more customers than a tiered plan.

"Nobody likes to keep track of bandwidth and storage. If they add a new Web page, they don't want to have to worry about how much storage it will take and whether it will push them into a new price category," he said. "Removing those barriers is a good strategy that will allow SMBs to focus on the core activity of growing their business."

Aggarwal said he believes the timing is coincidental and has nothing to do with Microsoft's recently announced hostile takeover bid for Yahoo.

Most importantly, Aggarwal said he believes that Yahoo's offerings are best suited to smaller companies. The tools and applications Yahoo provides make it particularly easy for small businesses to develop professional-looking Web sites and upgrade them with e-commerce activities, he said, and the company offers a host of helpful marketing tools, such as a tool that helps businesses find keywords that will bring their sites up in search engines.

"Because they have worked with so many small businesses, the level of understanding Yahoo has about what these businesses need is high," he said.

For such businesses, this new offering is a valid and interesting option, Gandhi said. "For SMBs, this is more hosting for less price that comes with 24/7 support and Yahoo's uptime guarantees," she said.