Researching Niche Profitabliltiy

Picking a niche is usually the biggest hurdle most people face when starting an online business. It’s possible to spend weeks — even months — on the issue without coming to a decision, which can be an incredibly frustrating and De-motivating experience. I know, because I’ve struggled with the process myself.

There are three things to consider when you're looking for a new niche:

1.Demand

2.Profitability

3.Competition

I think the OP is asking HOW to research the basics and not just 'what' are the basic considerations. Demand is basically a matter of identifying the audience. Profitability is discerned by observing what that audience is already seeking, by way of solutions to a problem they have, including (online) what keywords, sites or communities they seek out to solve that problem.

Competition becomes a matter of 1) how many others are offering to meet that need, and 2) how many of them are competently doing so. If either of these two are 'thin' in number, you have an angle through which to dominate that niche market. Many articles on the web cover this subject, the below being just one example:

How to Research a Profitable Niche Market - in 5 Easy Steps

Google Trends

People tend to over think this. I've been analyzing markets and specific niches for over 14 years. A niche that has businesses in it making money and are spending advertising dollars are two of the biggest signs that it's a niche that is making people money.

The "how" profitable it will be for you, well, that's another question entirely, and it's too general of a question to really give you a specific answer.

First of all, every niche has a different set of dynamics and purchasing behaviors. There are also different types of business models and in many niches there are many different kinds of ways to monetize traffic.

Sure, you can try and find publicly traded companies in any niche and you can look at their financials that way. But what about the ones that aren't? Well, you're right, they're not going to tell you their numbers. And guess what? They don't need to.

After all these years I've thrown away all my fancy schmancy formulas, many of my research tools (it was superfluous) and have boiled it down to just a few relevant factors:

1. I look at niches at specific needs and wants. Whether it's teeth whitening, curing sweaty palms, how to coach little league, how to improve your golf swing, how to talk to women in bars, how to text a girl to get her to like you, cure baldness, how to have better sex, how to meditate to lower your blood pressure, how to use a vita mix to stop wrinkles, how to recreate a certain hairstyle, etc.

Look at a general market and then narrow your focus so that it becomes more of a specific need and want. You're filling a "gap" so to speak.

2. Competition. Yes, there are some niches are there that have very low or no competition (in fact, I found one this year). But many niches that make people money already have others selling in them.

3. Advertising dollars. "Follow the money" the late Gary Halbert once told me when I was really wet behind the ears. Back then, I wasn't quite sure what he meant.

Ads are everywhere! When you log into your free mail account, almost anywhere you browse on the internet, and even on your damn smart phone. When you're doing your due diligence and figuring out what keywords people are searching for you're going to start seeing advertisers. You can check Google, Bing, Facebook, etc.

Now, just because people buy ads does that mean they're making money? Not necessarily, which is why you have to pay attention.

4. Products and services. How many are there in that niche? How many have affiliate or partnership programs?

But Rod, what about competition? What about saturation? Having competed in some of the most uber-competitive niches around, I believe that market saturation in many niches is mostly a myth.

Pick up Brian Tracy's Create Your Own Future and he goes into great detail on how you can compete, in a very competitive market. Savvy marketers know this which is why they're not afraid to jump into "saturated" markets because they know they don't need to outrun the bear (competition), they just need to outrun the other guy.

RoD

There's no way to accurately figure out anything like this...

What you could do however is look and see how many sales are being made in your niche, how many searches, etc.

You can do this by going to places like Amazon.com and seeing if there are reviews for the products. If you see a product with 100 reviews and the product costs $100 you can immediately acknowledge that $10,000 was spent there and likely much much more as reviews aren't left that often. I've personally only left a review on Amazon for 2 products I've bought in the past.

And then you can see how much advertisers are paying for things like Google AdWords inside of your niche, of course they may be paying less or more.. but overall it'll give you a great idea of whether money is spent on your specific niche or not.

But.. I will say this.

In my experience, nearly every niche is profitable. Even those that are extremely small with very few searches per month can make a profit. I've had a friend promote thimbles which are searched quite a bit and he made some great money with it. But I've personally promoted products that are barely ever searched, yet selling just 1 or 2 would give me a bigger paycheck than my previous 9-5 job.

I couldn't guarantee if there method will clearly reflect the profitability in your niche, but here goes:

Google search a few keywords in your niche.
Are there at least a few strong websites in the first page? Are they selling something?

Are there paid ads for these keywords?

Are there strong & ACTIVE facebook groups in your niche? People generally keep their group active if they are making a profit.

In the last 15 years I've researched millions of niches and can tell you that some seem to be small but conversion rates are so high that they beat other bigger ones

James has summed it up pretty well. If you do further research on each niche market you will realize some are definitely bigger then other ones (MMO, dating, health). You could use clickbank as an example.