Go Daddy’s announcement follows last week’s debut of new $2.99 a month plans from 1&1 Internet featuring a domain name, 1 gigabyte of web space, 2 gigabytes of email storage and 50 gigabytes of monthly transfer.

On Tuesday Microsoft unveiled a preview of Office Live, an element of its new push to deliver services over the web. Office Live will provide companies with their own domain name, web site, and e-mail accounts for free, according to Microsoft. The accounts will include 30 megabytes of storage, five e-mail accounts, a WYSIWYG web design tool, and analytic software to interpret traffic data from server logs.

But Microsoft’s free hosting will also come with advertisements, which is likely to be an issue for many businesses seeking a professional web presence. Advertiser-supported free hosting services have been around since the mid-1990s, including offerings from Yahoo through GeoCities and more recently its Yahoo Local! service, which have peacefully co-existed alongside Yahoo’s paid small business hosting.

While Office Live is unlikely to put large hosts out of business, the pricing wars continue to squeeze smaller hosting providers, who are increasingly looking to converged services such as VoIP as the next frontier in value-added hosting. The industry consolidation is also likely to continue, as some providers opt to cash out to take advantage of merger and acquisition activity in the shared hosting sector.