Domain sales have also become an important tool in the business hosting market, where domain registrations have surged in the past 18 months, even as prices have dropped steadily. Hosting providers like Hostway, EV1Servers, Interland and Yahoo have used cheap domains to attract hosting customers.

Those four hosting companies are not domain registrars, however. All buy their domains from wholesalers like Tucows, Go Daddy or Melbourne IT, and have a minimum per-domain cost, usually at least $6.50. Rather than viewing domains as a for-profit business, these providers have approached domain sales as a marketing cost. A recent survey by The Web Host Industry Review found that the keyword phrase “web hosting” was selling for $7.70 per click on Google AdWords and $9.02 on Overture. Not all of those clicks will become new customers, either, making a $1 or $2 loss on a domain sale seem like an affordable way to acquire a customer.

The greatest domain cost efficiencies are available to hosting companies that are also ICANN-accredited registrars, such as 1&1 Internet of Germany, which offers .com domains at $5.99, the lowest non-promotional price of any major hosting provider. As a registrar, Google could have similar flexibility to aggressively price its domain names.