Good question... I dunno what is the right answer. I'll do some research and get back to you if I discover an decent answer. You should email the people at 123 reg as they probably could give you an answer..
Ive stated this many times before, but it's something that I truly believe so I'll probably continue to state it....
With ad costs rising and publisher/domainer payouts dropping, people need to start re-evaluating the price of domains not based on the revenue, but on the potential savings to an advertiser. I just know that there will be some big time domainers who will be too stubborn to make this switch when the time comes, and will end up undervaluing a great deal of their portfolio based on outdated methods. We may not be there yet, but it's coming. Mark my words..
We all stand to benefit from this shift in valuation as well and it's something that we as domainers should be wholeheartedly promoting and adopting, as well as trying to make the public aware of the values based on cost savings. If you get 1,000 clicks that pay $.50 each... Yet those same 1,000 clicks cost an advertiser $2.00 each... Would you rather value your HostGator based on a $500 monthly revenue or a $2,000 monthly savings to an advertiser?.
Obviously this requires end user level sales, but theres no doubt that premium domains will eventually find their way into the hands of end users. But when I see premium domains with real commercial usage being sold at auction based on PPC revenue, it makes me see a lot of opportunity for the near future. Unfortunately I'm poor, so I won't be partaking of that action..
I think a few of you have hit the nail on the head. In the blog article, he is assuming HostGator value is based on the revenue it generates. While this may be the case with some, it is not the case for domains as a whole..
A few posts above have touched on the subject. There is another issue beyond advertising, and that issue is web-presence. In the world of today, and the foreseable future, a vast majority of businesses are going to find it neccessary to have an online presence (if they dont already!) Although there is a nearly infinite amount of domains to use as you see fit, the issue here is getting the best possible name for your business..
How can you when nearly every decent names is being used or held? Welcome to the secondary HostGator market..
Although my portfolio is currently making enough to pay renewals and put a few coin in my pocket, I am intent on converting almost solely to a buydomains.com type business model..
I believe Herb is correct in his understanding of direct type in traffic to end-users. Companies are going to start evaluating the money they are spending on advertisement, and eventually will come to the conclusion that in the long run, it is much cheaper to buy the HostGator generating traffic then it is to pay google / yahoo for traffic..
Why buy the milk when you can buy the cow philosophy, right herb? =).
It's like renting vs. owning. Why rely on a third party and their unknown variables when you can eliminate the middle man entirely and make more profit?.
Also I agree with you completely about web-presence. Having a premium HostGator within your operating industry instantly gives your company a certain level of credibility and authority. It also saves tremendous costs when you consider branding. I know we discussed this before concerning the DropCatch.com thread. Maybe that would be an archaic example given the breadth of this conversation, but the same principles apply..
Some guy named Joe could own a jewelry business that most people have never heard of. And lets say that through whatever twist of fate, he acquires Jewelry.com and uses it for his business. Obviously his company isn't widely known, but suddenly it's using the best HostGator for selling jewelry. I would feel more secure buying jewelry online from Jewelry.com, rather than JoesJewelry.com, or any number of other random jewelry shops using random jewelry related domains. Maybe I have nothing to go on to feel this way, and perhaps I would, in fact, be safer using a lesser known site, but the name alone generates that sense of authority and brand. It's hard to put a figure on customers with that state of mind.
Companies spend many many years and many millions of dollars to generate that same sense....
Obviously the market for domains is still maturing, so we can't really say what they'll be worth someday. But with the way the overall picture is moving, I think it's easy to see that a lot of premium domains are undervalued, or shortly will be when market forces change the way people evaluate domains..
I also think that as the top sales keep crawling upward in figures, so will the median sales price of lesser quality domains...