Just because a discounted price for a year up front works out to be a low amount per month, doesn't mean it's worth little to the business charging it. Depending on the business, it might actually turn out to be $4 a month if that user were prone to cancelling after 6 months. Additionally, there is alot to say about money in the bank now to fund development now.
I would be happy if our 20k users all payed for a year up front discounted by 30%, rather than a full-price for every month. Why? Because we don't have much income now, and getting the money now would allow us to expand much faster, so the next 20k users would signup quicker, and would not have the big discount for an entire year up front.
Also, the overheads (credit card fees etc) are often lower on $25/year billed yearly then $2/month billed monthly (once you are at Yahoo's scale this might not apply, but for a lot of businesses there is a flat fee for processing credit cards below a certain threshold).
