When you try to sell something, I think it's useful to understand what motivates buyers.

So... why would someone buy a domain name?  Is it fun? 

Well, a little fun, maybe, but the reasons appear to fall into three categories: immediate profit, branding (including vanity), or speculation.

Immediate Profit

One can make money from a good domain name without a lot of work by placing targeted advertising, sponsorsorships, etc. on your web page.  Because of folks like Google, simply by putting some good links on your page, you can make money when your visitors click on these links.  The amount you can make is a combination of the following:

How many people come your way? 

You can only make money based on the actions of people who are on your web page, so the important factors tend to be things like how many people type in searches which bring them to your web page.  Those searches could be directly entering your domain (typing table.com into the URL bar of their web browser) or brand name, or entering a search for which you rank well because of some content on or links to your site, or following links from other places. 

The collective unconscious of searching generates a certain set of search opportunities, and your domain's content, link acquisition, search engine optimization, and so forth will determine to some extent how many of these opportunities you can see.  One crucial relevant point: Google and other engines positively weigh the occurance of a search keyword in the URL, so if you want to rank well for tables, owning table.com could be very helpful. 

How expensive (or more accurately, how profitable) are the items you're selling?  How likely are the sellers to be able to sell what they're advertising to your audience (called the conversion rate)?  Together, this implies how much money someone might be willing to pay for a targeted "click."  If the item being sold is inexpensive, you need a very high quality audience.  If the item being sold is more costly (like, say, a yacht), someone may be willing to pay a lot per click even if the conversion rate is quite low.

Because of folks like Google, it's pretty easy to get into this business.  It's like owning a rental apartment, but with a much, much lower cost of entry.  You can buy a domain name for a few hundred dollars, and turn it into a recurring revenue stream. 

Branding

A second reason to want a domain name is to include it as part of a longer-term branding strategy.  In this case, the domain buyer is betting that over time they'll be able to make more money by having a recognizable brand/domain name which will increase their core business.  Unlike the advertising play, brand folks are interested only in domains relevant to their business.  This interest could have to do with a particular product launch (usually not a generic name) or as a place to showcase industry leadership (where a generic name could be very good).  Or the strategy could be purely defensive, to keep competitors from nibbling at their business by buying up good generic names.

Branding works for a lot of the same reasons we've already discussed.  People tend to type in the names of brands more than they would type in other similar phrases, which gives the owner the chance to monetize the traffic.  Though it may not be immediately obvious, in the long run this strategy is the same as the advertising strategy, because the brandholder will use the brand equity to sell a product, perhaps one or more items of its own manufacture.

The value of a brand is not as tangible as direct monetization, but the parties involved tend to be better funded than most individual domainers, and they have a lot more to gain or lose since they're in their business for the long term, and they can't easily diversify their portfolio of opportunities.

Vanity Domains

Of course, what you want brand may be yourself, and you may never intend to make money with your domain...  it may be just a clever joke among friends.  There is a market for such domain names, just like there is for vanity license plates.  For instance, I own such a domain based on my last name.  Since there isn't really a profit motive, my guess is that the prices for these tend to be relatively modest.

Speculation

If you think that a domain is mis-priced, you might be interested in buying it, holding it for awhile (perhaps making a little money while you own it via the advertising strategy), and then reselling it at a more auspicious time to a more appropriate market.  The proper price probably comes from one of the previous two strategies, since your buyer (or someone down the line, at least) will be a non-speculator with the need to make money from the domain.

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