My first sentence was “This is a debatable subject.”, because I understand there are many subjective aspects of this valuation practice. However, from a purely objective and measurable parameter – traffic, would you agree that type-in traffic to the generic term will decrease as a company establishes a leadership position in an industry? Thus, revenue from this name will most likely continue to decrease.

Another, more subjective aspect to consider is differentiation through branding. Now that there is an established dominant brand in that field, how valuable would it be from a marketing point of view to establish a brand under a generic word? Instead, you buy the generic domain and use it for its traffic to be redirected- not as a brand.

Now lets tie these two together – traffic and brand. Where do we see this happening? Everywhere. Bank of America owns loans.com, but it is used for its traffic as a redirect to their own brand. Pets.com (Petsmart), Weddings.com (TheKnot.com), Money.com (Money.CNN.com). How then, would a buyer justify much of the price? In its simplest expression, we could say (Traffic X Worth of Traffic) + (Some Credibility X Worth of Credibility). If the type-in well is drying up, then the worth of the domain name will be impacted to the down side.

Everything that you have said is true. Something’s missing though…and that’s the other companies.

“then you should try to sell the domain name before the company establishes itself as the leader. ”

That is only thinking of trying to sell to the leader. While this would be the best option, it is hardly the only option. Lets take Google. The value of Search.com would depreciate from Google’s stand point, but may very well appreciate to Yahoo!. In a tight battle, Search.com could yield the difference to Yahoo! (I have no idea about their true data, just an example) Thus, if you own a category, you own credibility (to a degree). That value may be just as valuable to #2 as to #1 (sometimes even more!)

This becomes important to the notion of

“then you should try to sell the domain name before the company establishes itself as the leader. ”

If the price is there, fine. But the implied temporal necessity is not there. There is no rush. Again, #2 will often pay more to become #1 than #1 will pay to protect it. Even if having the category does not automatically make you #1, it could make the difference.