What makes a domain name increase in value ? is it a good investment?

apparently Bill Gates said they are going up in value like nothing else, but I dont understand why that would be as there are so many variations of any word or set of words you choose.
If so how do you know what a good one to buy is ?

Domains go up in value when someone is willing to pay more than you did. It's all about the demand. If no one wants your domain, it's not worth anything. However, people want certain domains because of the potential to turn them in to a money-maker.

It's like buying land out in the middle of nowhere and then having the good fortune of a highway being built beside your land. Now your land is worth more because someone knows how to make money off of it being close to the highway.

All of the easy pickings with domains are gone though. It's a much harder game today than it was several years ago

Unfortunately purchasing domain names to resell was hot about 8-9 years ago... I agree with you.... and am not sure when Bill Gates said they are going up in value. Most major corporations (those who would purchase a 'taken' domain name) have already found another name that will work just as well....

I have noticed that some big name domain / hosting companies will buy up and park on domains based on current events and reality TV shows.

Towards the beginning of America's Got Talent, I noticed that "Big Daddie" had purchased and parked on Glamazon.com and Glamazons.com. Seems that maybe they were betting on that person to win....

It is like playing soccer... it is not about where the ball is now but where it is going to be.

Figure out a societal trend and try to get in front of the wave.

BTW: I hate domain squatters!!!!

With the increasing consumer shift to the internet the domain name industry is hotter than ever doing about $2 billion annually.

The big money is in generic domain names that receive direct navigation or "type in" traffic that can be leveraged and developed into a powerful website. Some recent sales and examples of big dollar domain name sales are:

Porn.com $9,500,000
Diamond.com $7,500,000
Vodka.com $3,000,000

Ad to that list the thousands of less expensive names that are bought and sold daily you can see why domain names have investment potential.

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