You should realize, if you are thinking of buying a domain name with the intention of selling it again quickly for a profit, that you are joining the prospecting game a bit late ? about ten years too late.

You may have looked at some of the domain name auction sites or the domain aftermarket, noticed the outrageous prices being asked, and decided that you could think of a good name yourself, register the domain, and find a willing buyer pretty easily. While it is true that many domain names are currently for sale for thousands, tens of thousands, or hundreds of thousands of dollars, very few names are actually being sold. Those that are sold, are changing hands for a fraction of the asking price.

So everything is not what it seems in the domain name business.

Most domains bought as investments are actually worthless (with a couple of exceptions, see below). They are sitting parked on a server somewhere, getting no traffic, generating no interest, and costing the registrant a recurring $10 a year or more.

Those domain investors who have made millions (by selling sites like men.com or business.com) did it by registering thousands of names in the early days, hoping that they go some gold among the dross. The gold field is now mined out. You may know that every word in the dictionary is now registered to someone.

But let's not be too negative. You can still make money from domains. How can it be done?

To continue the goldfield analogy, if you want to make money from domain investments, you need to be very imaginative or have some inside knowledge ? in other words, you have to find an entirely new gold-bearing field. You need to anticipate products or trends before anyone else, and register a pile of names that may become desirable later.

If you can do this, while avoiding potential trademark or cybersquatting disputes, you may be able to profit.

The other exception to the rule that most domains bought as investments are worthless is to do with site building. If you have the skills to build a site, optimize it and get some backlinks, it could become a valuable property because of the traffic it receives from the search engines. Though this takes more time or more money, or both, there is a much better chance of making a financial return on a domain this way ? by selling products, using affiliate programs or Adsense, or selling the whole site and domain itself.

Doing this, you have created something of value, and finding a buyer will be that much easier, particularly if you get your site some Pagerank or can prove it gets decent traffic.

The gold is still there, but these days you just have to work a bit harder to find it.