Admin Note: We simply swapped out the collectable in this Wall Street Journal story with “domain” and “generic” with very little else to show how another market seem to be mirroring the domain industry. Found it striking. We would love to hear your comments and thoughts.

When is a generic domain worth a million dollars?
When it’s a commerce driven. generic domain, one of only a handful. It recently sold for nearly $1.3 million at auction—and this isn’t the first time a domain has cracked the million-dollar price barrier.

It follows the sale earlier this year of a high-end collection of rare domains that fetched $1.1 million at auction. At the same time, popular keyword domains driven by advertising interests are selling for $1,700 apiece, sight unseen, in decent, though not perfect.

Today’s domain market is largely defined by high-end investors grabbing the rarest of domains that infrequently come up for sale; vanity buyers snapping up vanity domains; and speculators bidding up prices for domains whose grades they suspect are too low, in the hopes of securing a higher grade and selling them for more money. Yet ordinary collectible domains—the popular keywords that are nice but not great—have fallen in value by as much as 30% over the past year, say domain dealers and auction-house executives.

“It’s easier to sell a $100,000 domain today than a $1,000 domain,” says John Albanese, founder of Certified Acceptance Corp., based in Bedminster, N.J., which verifies graded domains.

Behind the trend are collectors like Robert Beckwitt, a 51-year-old New York money manager. He renewed his fascination with collectible domains a few years ago because domains were cheap. Today, his interest in high-grade domains reflects an investor’s mindset.

“This is my way of diversifying away from stocks and bonds and the U.S. dollar,” he says. In recent years Mr. Beckwitt has snapped up some of the finest examples of domains available, such as the highest-graded Staffing.com. Over the summer he grabbed for an undisclosed sum the finest-known attorney domain. “It wasn’t cheap,” he says. “But I love the potential of these domains.”

Before the economic crisis, the domain market was defined by rapidly rising prices for all manner of domains and widespread demand from seasoned collectors, casual hobbyists and investors. Now, casual hobbyists and low-end collectors are largely sitting on the sidelines, victims of the economy.

The domains at the focus of today’s activity have generally held their value or are rising, either because of their advertising value or because of their rarity. A September auction of rare, generics established world-record prices for ccTLD domains, among them the generic domain that sold for nearly $1.3 million, including commissions—well in excess of presale estimates of about $250,000, says Ira Goldberg, co-owner of Beverly Hills,Calif -based Goldberg Domains & Collectibles, which ran the auction.

Many collectors also see high-end domains as a viable asset class at a time when they’re dismayed by stocks, bonds and other investments amid worries about the economy and the long-term direction of the dollar. Historically, high-end domains have fared well as an asset.

“Though I think of myself as a collector, I’m really an investor,” says the 68-year-old Mr. Friend. “I’ve realized I have very little control over investments in stocks and real estate. But with domains I can know all there is to know about the investment I’m going to make.” He has recently started building a collection of netbook and computer domains.

Many domain buyers these days are hoping for a quicker score through the “Twitter” strategy. They’re buying high-quality graded domains and promoting the twitter out of them in order to resubmit to them to a appraisal service for a higher grade. They choose domains, in part, based on how they look compared to similar domains of the same grade. Many times they’re right, and the domains are ultimately awarded a higher grade.

Though there are huge risks with this strategy—including the potential that a domain is downgraded or loses its grade altogether—a successful regrading “can add thousands of dollars to a domain’s value,” says Scott Travers, a New York domain dealer and author of numerous domain guides.

“I’m getting calls several times an hour from people who want to play the crack-out game,” Mr. Travers says. “If you’re really careful about what you’re buying, there’s tremendous upside and little downside.”