I don't deal with finances, but I'll hazard a guess here... the donations people made out of the goodness of their hearts or for cosmetic items just weren't enough to cover expenses, so we had to resort to stuff that did? Sounds plausible to you? Seems pretty realistic to me.
A while ago, in one of the Shadowmourne whine threads around, I made a hypothetical proposal to the people complaining about it being a donation item: the possibility of people to donate to keep someone else from getting that weapon. Same donation value as we'd get, and no coins or benefits beyond simply keeping someone else from getting it. Surprisingly, people didn't jump at the opportunity and started asking for it to happen, volunteering themselves to be the first ones taking part in it. Strange, isn't it?
People use "other games" as examples of surviving "just" on cosmetic items. The only problem is that's a lie. Those games always have more than that. It might be a "7 days x2 XP" or it might be 1-month long benefits or it might be crafting items, of which you usually need dozens, and it would take weeks of constant farming to get enough for an attempt at improving an item with a +1 (emphasis on "attempt," since on most of these games you have a chance of success, which funnily enough you can increase with other cash shop items). All of those are just time-savers - exactly like having a limited selection of items up for donations, when you're free to farm for them the old way. The curious thing is that, on those games, spending a hundred bucks into crafting items to allow you to save time isn't somehow seen as a pact with the Devil like people seem to treat it here.
On top of that, they have much, much larger playerbases. With enough players, you can maintain yourself even if only 1% of your players regularly spend cash with you. We don't have that luxury, though.
It's natural that people would rather have no coin shop at all, but also unrealistic.We have data on what coins are used, and I'm pretty sure those were looked into to determine that simply offering cosmetic items isn't enough to cover the costs of a server. Could it be different on Lordaeron? Who knows. Feel free to prove me wrong by suggesting and option to donate without getting coins, and then using it regularly.