Justin Jackson wrote a blog post titled The Myth of the Niche Market challenging the idea that “because the web is so big, even small niches have thousands of members; therefore, you can target almost any niche and make money on the internet.”
“1,000 people x $100 year = $100,000.” However, you need a much larger pool of prospects to make 1000 sales. “It’s not tenable to start with 7,000 potential fans and have enough people go through all six stages” (awareness, knowledge, liking, preference, conviction, purchase). And if those are one-time purchases, you’ll need an even bigger pool for a sustainable business.
Justin also notes, “Focusing on a smaller market could mean everything takes longer. And when you’re bootstrapping … your biggest risk is surviving until you get to scale.”
He points to successful entrepreneurs who targeted a large pool of customers. For example, “There are over 5 million PHP developers in the world, so when Taylor Otwell launched Forge, he got 1,000 customers within a month.”
“I believe that the market you target defines your company’s capacity for success.”
This topic reminds me of a book called The Long Tail, about an economy of niches. From my review: “It strikes me that the examples in the book explain the benefits to online retailers of carrying a long tail inventory; however, unless you are selling battleships, one sale per quarter does not sound so profitable for the manufacturer.”