Yahoo Launches Unlimited Hosting Plan

The "unlimited" hosting account has always been controversial within the hosting industry. Some see it as a marketing gimmick that promises more than it can deliver, while others say the focus on disk space and bandwidth quotas is geeky, and has contributed to the growth of niche hosting plays built around blogs, photos and videos.

Can the hosting quota be killed? Yahoo is ready to find out. Yahoo Small Business has introduced a shared hosting account with unlimited disk space, data transfer and email storage space for $11.95 a month.

"Yahoo understands that small business owners face a number of obstacles to success, and we don't think that the growth of their online presence should be one of them," said Guy Yalif, director of web hosting products for Yahoo. "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 megabytes."

In some respects, Yahoo's move is the inevitable endgame in an ongoing arms race between major shared hosting firms, who have been super-sizing the disk space and data transfer on their accounts for two years. Most entry-level shared hosting accounts come with at least 5 gigabytes of disk space, which as I noted back in 2005, represents "more resources than most prospects can imagine, much less use."

The timing of the offer, coming days after Microsoft's $44 billion takeover offer, certainly suggests that Yahoo staff are focusing on business as usual. Yahoo Small Business has more than 1.5 million shared hosting customers, and its online store offering is among the most successful e-commerce offerings for small businesses. With its infrastructure resources and marquee brand, Yahoo could bring credibility to an all-you-can-eat disk space and bandwidth.

"Whenever you reduce costs and complexity for small business owners, you add tremendous value to their companies by freeing them to focus on their core businesses, and not worry about technical issues like bandwidth and storage - which they don't understand," said Sanjeev Aggarwal, vice president for SMB infrastructure solutions at AMI-Partners.

What does "unlimited" mean? Yahoo provides caveats on all three metrics:

Yahoo's move is likely to prompt an explosion of unlimited accounts from providers who feel the need to match Yahoo's offer, but may be less equipped to make good on the promised resources. In a sense, Yahoo's new plans could break down resistance to unlimited offers.

That will no doubt cause pushback from the many critics of unlimited accounts and "overselling" of disk space and bandwidth, which is seen by many as misleading to customers. Some providers - notably DreamHost - defend overselling as a legitimate business practice. Yahoo's unlimited accounts may reactivate this debate.

Here's the larger question: Is this just a marketing gimmick; a bright shiny "UNLIMITED" bauble to dangle in front of small business folk? Or is it an effective way to attract customers from HostGator who find that 1,000 gigs of disk space is simply not enough? Tier1Research and other industry analysts have been urging hosting companies to focus on features rather than specs and quotas. It may just be that resource allotments for disk space and data transfer are dead, and Yahoo has written the epitaph.