I don't see the logic here at all. If I start an application and it's called "buffer" and I have no money and the domain buffer.com is being sold by some domain

I don't see the logic here at all. If I start an application and it's called "buffer" and I have no money and the domain buffer.com is being sold by some domain squatting pirate for $200,000 then obviously I can't buy it. The choice then is to find a name like squeebo.com or whatever that no-one has yet or go with a less popular TLD like .co (which seem to fill up just as fast as they're released). However, if I go with bufferapp.com and get it for $8.95 or whatever the going rate for a domain is, then if/when my company blows up and becomes Buffer the unstoppable international juggernaut, how valuable is the domain buffer.com? No-one's going to start a company called "buffer" any more. So the value is in direct type-in traffic and monetisation through AdSense revenue. No-one else is going to buy it - you've got a market of one buyer and one seller. If the buyer decides to take his ball and go home, you're shit out of luck and have to monetise the domain yourself. What determines whether or not facebook.com will remain "intractibly expensive no matter how big you get" (ie. facebook.com now has more money than most countries) is whether or not the type-in traffic for the domain facebook.com can be monetised using ads for more than facebook.com is willing to pay for it. I have no idea about the stats behind type-in traffic but a lot of stuff I've heard indicates that "mainstreamers" would tend to type "facebook" into Google more so than the address bar so I'd be very surprised if the value of the domain didn't peak pretty early versus what the owner could have done with the money had they sold for a million or so in the first few years that facebook started to blow up. Overall, though, I'd say that the fact there is only one buyer for a domain once a company establishes itself, and the fact that the risk of choosing a shitty name to suit the shitty domains you can afford, or of spending a lot of money on an awesome domain before you've even been able to go to market (holler.com anyone?) are far greater than the risk of having to pay what is comparatively a pittance once your company is making money hand over fist and needs to "cross the chasm" in order to continue to grow.