Selling "premium" domain names question

This might be somewhat of a newbie question but hopefully someone can answer this. I have seen many different domain names listed for sky high prices, so I decided to check out a few of them and I can't figure out why they are worth so much. There are no sites being hosted on them (other than a general ads page), they have no real traffic and the actual names aren't even that catchy.

It would make sense if the domain had a lot of traffic or even if the domain name was something very unique like "freebies.com" but how do people come up with these prices ranging anywhere from $300 to $30,000?

Common-sense would suggest that if someone really wanted a domain like "freedrinks.com" they would try other variations and put the "$30,000" into the developing the site or advertising instead.

Is it just a case of companies buying up domain names, sticking silly prices on them and hoping some corporate giant with a big budget is going to take a shine to one of there "premium" names and buy it or is there something more to it than that?

Wow. Not a single reply. I thought *someone* might know about this here.

There are people out there that have some sort of way to see what domains people search for and they snatch them up so if those people don't purchase them right away they would have to spend a fortune if they really wanted that domain.

One thing I never do is share on an open forum what domains I'm looking at and I always Google that domain first rather than put it in GoDaddy to search for it. I have heard too many horror stories.

Yes, it makes sense that they have techniques or programs to find out popular domains. What I was really curious about is how they calculate how much a "premium" domain is worth (because the price varies so much) and if people outside of large corporations actually go for it.

There are so many alternatives I can't imagine anyone wanting to spend that type of money on just a name short of it being incredibly catchy.

There are alot of people out there who purchase domain names and they call it virtual real estate. They figure that if the name is popular enough that they can hold on to it and when someone is ready to purchase it they can negotiate a buying price for the domain. As for how the prices are created I am unsure...

However when I first got heavy into internet marketing I saw a domain that had the name American something in it and it sold for 1 million in a domain auction on GoDaddy!

A million dollars for a domain. That is surreal. Anyway, thanks for replying.