I see a lot of people posting here almost daily asking about how to pick a profitable niche. So I thought I'd give a quick outline of the process I use. Hopefully this will clear up some of the questions.
--NOTE-- I posted this already in response to (yet) another person asking how to evaluate a niche, but I see this come up so often that I thought it deserved a post of it's own.
People make this whole niche selection thing too complicated. They WAY over think it.
When it's all said and done it boils down to this. If you want to know if you can make a profit in any given niche you have to test it and see.
I'm not saying to just test any hair brained idea that comes along. There are certain signs (or qualities of the market) you can look for that lead to testing. There are 3 qualities you need to look for, they are...
1. Are there a lot of people with a passionate (more than just casual) interest in the subject?
2. Are those people ALREADY spending money on products and services related to that market?
3. Can you get your message in front of those people easily?
That's really about it. Of course each of those questions requires a bit of research to answer. But if you find a market that says "yes" to all those questions then it's worth TESTING that market out.
Here are the overall steps I use when going into a new niche...
1. Brainstorm ideas. I like to come up with a list of 15-20 potential ideas before moving on to the next step.
I also tend to lean towards markets that are pleasant in nature like a hobby or something the person enjoys doing instead of helping them fix some problem they're having.
You can make plenty of money helping people with their cheating spouse, and other stuff like that, I just find that the customers are a little more pleasant to deal with when it's a hobby or something they really like instead of something unpleasant going on in their lives.
That's just my personal choice though, you can still make plenty of money in what I call the "negative markets".
2. Qualify your list of ideas. Basically you answer the 3 questions I listed above and use the answers to narrow down your original list. Usually, during the process of answering the questions you'll have 2 or 3 markets that jump out at you. They'll have all the qualities I listed to varying degrees.
If all the markets have about the same number of passionate people, who are spending about the same amount on related products and services, and you can easily reach the people in each market, then you can just pick one at random or (and this is what I suggest) you can pic the one that seems interesting to you, at least to some degree.
This is important because if you decide to go deep into the market (this is where the REAL money is made) you're going to be spending a lot of time in that market. You don't want that time to be a grinding experience so you might as well choose something you have a chance of liking if business takes off.
If one of your finalists clearly has more people spending more money and you'll be able to reach them easier then just go with that one.
3. Test the niche. The easiest and quickest way I've found to get real proof of spending in the market is to promote an affiliate product. This is where the proverbial rubber hits the imaginary road.
You'll be making an investment of either time or money to verify that people are spending money on the market.
Along the way you'll find out what kinds of marketing approaches are working, and you'll have a good idea of what will be required (in the way of sales and conversions etc) in order to make a profit in the market.
If you determine the market isn't as profitable for you than you originally thought it might be you have a choice. You can try to test and tweak and improve your marketing to make it profitable, or you can start the testing process over again with one of your other niche 'finalists" from step 2.
If the market looks profitable you can move on to the last step in the process...
4. Build out. Simple, create your own product and sell it instead of the affiliate product you were promoting. You get to use all the experience you've accumulated from selling the affiliate product in the promotion of your new product and you get to keep all the money from your sales since you're now the product owner. Plus you can form joint ventures, swap promotions with other list owners and all the other stuff that brings in the real cash.
And that's about it. I could add that once you max out the potential in that market you can use the process again to find a second and third market etc.
The beauty of this process is that it's "ever green". Meaning that the same basic process will always work, whether it's today, tomorrow, or a hundred years from now.
Anyway, I hope that helps make things a little clearer for all the folks who are frustrated with the niche evaluation process. It's not a difficult plan to implement, you just can't skip any of the steps along the way.