Most people (not people in this forum) have only one or a few domains.
And most people use the same company for hosting.
1and1 get money on hosting, not on domains.
PS : in France, 1and1.fr have 10 years, and since more than a month they give 3 years of hosting (2GB space, 20GB traffic, 500 emails, perl/php/sql, ssh, ect... it's their best offer before dedicated server) and a .info for ... free.
It's something they should sell about 10โฌ/month (360โฌ for 3 years).
And they made a lot of ad on all tech magazines.
1&1 strategy is apparently to get as many customers as they can, even if it cost a lot of money today.