3 Reasons Why It Pays to Go Niche (Literally) – Smaller Niches, Bigger Profits

April 21, 2009 - Written by Gyutae Park  

orange piecesWith each passing day, the Internet is getting more and more competitive as online businesses attempt to gain market share and claim their piece of the pie. In fact, you might remember that I wrote about how the window of opportunity for independent webmasters is shrinking as the web matures and big online brands are established in various niches. Starting a successful online business 10 years from now will be exponentially more difficult than it is today.

If you haven’t noticed, the web is already saturated in most industries and practically every big topic is covered in depth by numerous players. In order to catch up and get ahead as a leader, you’re going to need a fat wallet, a unique competitive advantage, or a revolutionary new idea – all things that most of you don’t have. Think you’re going to overcome CreditCards.com by creating a similar site and offering the same information? Think again.

nichesegmentsNow don’t get me wrong. Opportunity abounds online and there are still a ton of ways you can make money and build a powerhouse business. What I’m saying is that it’s just going to take a more concerted effort focused in on a specific subtopic. In other words, the best online business building strategy right now is to go niche. For example, rather than compete with Zappos by selling every kind of shoe under the sun, focus on selling basketball sneakers to youth. You get the idea. It’s better to dominate a sub-niche than it is to play follow the leader in a competitive industry.

Types of market segmentation

There are 3 different ways you can segment a niche and focus in on a smaller field.

By topic
Drill down to a subtopic that has much less competition, but still has good amounts of interest. Use the Adwords Keyword Tool to gauge the search frequency for related keywords. Although you want to go niche, the last thing you want to do is focus in on a niche that no one cares about.

Example: Rather than create a site providing general guitar lessons, focus on blues guitar lessons.

By geography
The Internet has global reach, but that doesn’t mean you always have to reach out to a global audience. Focus your offering for a smaller geographic location. You might initially think you’re limiting your potential, but people appreciate the local feel and may prefer your site over others.

Example: Craigslist and Yelp both started out solely for San Francisco and eventually expanded to other markets. Do the same. For instance, rather than create a restaurant blog for an entire city, focus in on a smaller area (e.g. Midtown in NYC) and establish yourself there first.

By audience
An important rule of conducting business is that you can’t be everything to everyone. The sooner you realize this, the sooner you’ll achieve success. Rather than create content that attempts to cater to everyone, choose a specific audience and tailor your site to fit its needs.

Example: Everyone wants to give college advice to prospective students because it’s the biggest college-related market. But what about parents and counselors? It’s a smaller market but there’s a lot of opportunity.

Feel free to mix and match these segmentation methods. For example, after some contemplation your business idea might be a membership site on Real Estate SEO for Internet marketing newbies in California. Your market will definitely be smaller than the overall SEO market, but there are a lot of benefits that come with that. We’ll get into those benefits now…

3 Reasons Why Going Niche Pays (Literally)

It’s natural to feel like you need to maximize your audience and get as many customers as possible to build an online business empire. While it’s true to an extent that a bigger market means more potential, working in a general competitive niche doesn’t necessarily mean more dollar signs, especially if you’re a small independent webmaster.

In fact, the opposite is true. For Internet entrepreneurs, it pays to go niche and focus in on a smaller subtopic. We’ll go into the reasons why here.

1. Easier to distinguish yourself as a leader
What’s easier – to compete with hundreds of established sites and break into a larger niche or to tackle a smaller niche and be one of the bigger players from the start? I think the answer is obvious. Starting an online business in a smaller sub-niche means that there’s less competition and more potential. Sure your overall market will be smaller, but you’re much more likely to dominate it and establish your brand as the market leader.

As I mentioned in a previous post about how to build a brand, branding is becoming increasingly important and is crucial for surviving in the business world online. By being one of the first in a sub-niche and owning a segment of a market, you’re known for something – and that’s a heck of a lot better for your brand than being mediocre at everything and being known for nothing.

Furthermore, attacking a smaller sub-niche means that your business can specialize in something – which means that you’ll position yourself to be an expert in reality (hopefully) as well as by perception. For example, search engine marketing firms have the time and resources to be experts in the marketing sub-niche of SEM. Not only that, but because they’re specialists, they are expected to know more about the field than general marketing agencies. Image is everything and specialization gives you a head start in being the leader. You just have to be able to live up to the role.

2. More defined target audience leads to higher conversions
As I mentioned before, it’s impossible to please everyone in business. You need to focus in on a target market and work in satisfying customers’ needs. By working in a smaller sub-niche, you’re attracting a specific audience that can relate to your marketing messages and has more interest in your products and services. Because of this, you’ll see a more loyal following and higher conversion rates.

For example, if someone was an avid X-Men fan, he’d probably be more interested in a site dedicated to X-Men than he would be in a site covering all of Marvel comics. The X-Men site is more focused and targeted towards what the user is looking for.

The conclusion? A site dedicated to a smaller sub-niche means more targeted customers – which results in higher conversion rates and bigger income.

3. Better positioning for future expansion
Not only is a smaller targeted site easier to start and get off the ground, it also presents greater opportunities for future expansion. Why? Because a targeted site has a focused brand and following which it can leverage to grow into new areas. Why do you think Yelp was able to expand past San Francisco? People saw that it was popular in one city and wanted to utilize it in others as well. Similarly, a small established blog about penny stocks can more easily expand to Forex trading and beyond – a much more effective tactic than covering overall “financial trading” from the start.

The step-by-step expansion approach utilizes leverage to maximize results. By starting small, you carve out a niche for yourself and you can then take advantage of your site’s reputation and brand equity to slowly branch out into areas

Final Words

A lot of the “gurus” like to tell you to “shoot for the stars” and play in competitive markets with the most people. This is pretty much online business suicide. The competition will eat you up and you’ll be lucky to see any growth at all.

By focusing in on a sub-niche, you have a greater chance of not only surviving, but thriving as a market leader and pioneer. Your specialization will attract highly targeted and loyal customers who will give you preferential treatment and thus increase your conversion rates. Although you may initially think that you’re limiting yourself by going niche, you’re actually paving the way for future growth opportunities as well.

It pays to go niche. Start small, and you’ll see big profits. What have your experiences been in this regard? How did you start off in the online business world? If you could go back in time what would you do differently in selecting your niche?

Hopefully, this is an eye-opening article for many of you. I’m planning on launching a new membership site related to the topic of niche discovery and research very soon (sometime in mid-May). Stay tuned. It’s going to be BIG and you won’t want to miss it.

If you like this post, subscribe to the RSS feed. Get the latest updates delivered straight to your email or news reader.
Posted in Articles, Internet Marketing
Winners Circle - Internet Marketing Case Studies
Related Posts:

Comments

48 Responses to “3 Reasons Why It Pays to Go Niche (Literally) – Smaller Niches, Bigger Profits”

Tom - Free Blog Niche Ideas on April 22nd, 2009 Subscribed to comments via email

Not only is it easier to conquer a small niche, but being the leader in one niche will give you the launching pad to target other similar niches.

Gyutae Park on April 22nd, 2009

The beauty of starting small is that you’re setting up your business for future expansion. A lot of people think they’re limiting themselves and their market by going niche, but that’s far from the truth. Dominate a smaller niche, then move on to a related one until you expand. You might eventually find yourself as the leader in a general competitive industry.

 
 
Dean Saliba on April 22nd, 2009

Very true and a very good post.

Sadly the niches that I have any knowledge in are not small. But I’ll eventually find one. :D

 
Christopher Ross on April 22nd, 2009 Subscribed to comments via email

As usual, great post! There’s an old marketing gimmick that I was taught way back in the early 90′s for clients who couldn’t afford to be on the local radio and TV stations, it was called media domination. Basically, you picked the one medium (postcards, billboards etc) that they could afford and you dominated it.

I think the same can be said about niche blogging. Instead of failing to appeal to the masses by running a website about television for example, run a website about british actors on American television … it may be a much smaller market share but it’s easier to dominate.

Gyutae Park on April 22nd, 2009

Thanks Chris,
Blogging is all about getting your name out there and bringing in exposure for yourself. Believe it or not, dominating a smaller niche will get you a lot farther than being a smaller player in a big niche. Good example with the media domination.

 
 
Jodi Suguitan on April 22nd, 2009 Subscribed to comments via email

Really great post! As someone attemptimg to compete in a saturated highly competitive arena I can attest to the truth in what you say. We see most of our traffic landing on our niche pages looking for something very specific. Lots of long tail keywords coupled with many web pages dilling down further than the competition seems to be key.

Gyutae Park on April 22nd, 2009

Thanks Jodi. Good to hear that you can relate to the post. Are you changing your website to be more focused? What I would do is use the top keywords users are coming in from and create a new niche business from that.

 
 
Daedalus on April 22nd, 2009

Thanks for the great insightful post. I have a question though :

What is the minimum size of people in order for that strategy to be successful ? i.e what is the minimum of people needed ?

I’m asking because I’m currently launching a website about internet marketing, which is far from a “small niche”… But the site will target french-speaking people, which already reduce the amount of traffic I can hope. (It’s sometimes hard to find datas in Google AdWords tool with some french keywords). So if I focus on an even smaller niche (let’s say “reviews of french-speaking marketing ebooks and products”), isn’t that too small ? How do you measure the “too small” breaking point ?

Thanks a lot for your answer, and congratulations for the great content !

Gyutae Park on April 22nd, 2009

Hey Daedalus,
Great question. There isn’t an exact answer on the minimum size of people required in a niche. It really depends on what industry you’re looking at.

As for your Internet marketing for French-speaking people, that’s definitely a great start. Once you get your site going, you might want to drill down even further by focusing on SEO, email marketing, PPC, etc. You’ll discover what you’re good at and what your audience wants as you further develop your sites. Once you’re at a segment level like Internet marketing, you’ll have to make your niche decisions based on your own passions and preferences.

Measuring the “too small” breaking point isn’t an exact science. You can use forums, blogs, analytics data, and keyword tools to see what’s popular but at the end of the day, you’re going to have to go at it (with a good strategy of course) and see what happens. Good luck!

Daedalus on April 22nd, 2009

Thanks for your fast and complete answers, that’s really cool !

Ok, so I’ll try to drill down if needed after some times dedicated to testing and connecting with the readers… The trouble with most analytics tools like Google AdWord keyword is that there is nearly never enough datas to have concrete and useful figures to find out about the potential of the niche…

So the question that remains to be solved is “when not enough datas is enough ?” ^^

All the best !

(Comments wont nest below this level)
Gyutae Park on April 22nd, 2009

Once you set up your site on Internet marketing, test out different types of content and see what sticks (e.g. SEO, social media, etc.). Look at what not only gets the most traffic but what engages users most (i.e. time on page, pages per visits). Looking at internal search logs also helps you to see what people actually want.

Action brings clarity. Once you get started you’ll be in a better position to decide how you want to segment your market.

 
Daedalus on April 23rd, 2009

Oki, I’ve a more accurate vision of what to do now, thanks to you !

Thank you so much for the valuable advices !

 
 
 
 
Eric Hamm | Motivate Thyself on April 22nd, 2009

One of the reasons I think this post resonates with us is because it gives the little guys the feeling that they can finally be the big fish and not just another minnow.

I’d have to agree that to specialize in a specific area has many advantages that can’t be touched by a broad scope. Like you said, you’re customers/readers will be more loyal and your focus will be crystal clear. I really liked @Christopher’s example as well. It just makes sense.

Thanks for laying this out for us and giving us something to chew. Eric

Gyutae Park on April 22nd, 2009

Hey Eric,
I appreciate the kind words. I’m really glad that the post resonates with a lot of people – that’s the biggest compliment you can give a blogger!

Everyone starts off as a “little guy” and everyone has to start somewhere – but there’s always potential to be that “big fish”. Good luck!

 
 
Jason on April 23rd, 2009 Subscribed to comments via email

Very well said Gyutae. That was an very practical insight into how to fit in the internet world and succeed. I completely agree that the online business market is becoming saturated as the trend is going that way …. from the physical world into cyberspace. The tips you gave are definitely helpful.

thanks for that!

Jason
@LearnInternetMarketing

Gyutae Park on April 27th, 2009

Hey Jason,
I’m glad you found the article helpful. The Internet is becoming more saturated each day, but opportunities will always remain for the best marketers. Still, it’s always a good idea to get a head start. Don’t procrastinate, people. The window of opportunity is closing!

 
 
Erica on April 23rd, 2009 Subscribed to comments via email

I agree somewhat- it is good to get into something new and have a niche. However, at the same time, “saturated” verticals work. Millions of people are on the internet and buy / click through those offers that are “saturated” every day.

Gyutae Park on April 27th, 2009

Hey Erica,
From an affiliate marketing / quick money maker standpoint, the “saturated” niches still do work. PPC affiliate marketers are having a field day with competitive weight loss and finance offers. However, I wrote this article from the viewpoint of longterm business building and branding. In that case, I think it makes sense to start small and work your way up.

 
 
Kaj R. on April 23rd, 2009

Thanks Chris – good article.

Erica’s got a point – in the big markets there are so many people that you are bound to get some response if you can get targeted traffic. It all depends on how many sales you need to make.

In the IM market, for instance, there will always be a need for explaining things better. In many informational markets we have all the info we need, but this info can be presented in better ways.

This way we can repackage and re-present the same basic info and still be able to sell it. It’s all about communication skills.

And another thing: people understand things differently. This means that the there will always be a need for a great variation in how information is communicated, if information is the thing being sold.

And the big market dominators will often settle for relatively few ways to communicate their message/info, and focus on those few ways to do it. Like when Nike create a big ad campaign, and run it everywhere for a month. They do not create 100 ad campaigns, and run them all at the same time. Even big market players have a limited budget, and there is a cost involved both in creating ads and running them.

Diversification is what we need, even within saturated big markets. I believe there will always be a response from diversification.

But establiishing yourself as an expert in a big market may be harder of course. But you don’t need to dominate the SEO market to earn money. If you can get 30 targeted buyers to your site each day, and 20 of them buys your $40 product, well then you are in business. As a small player you do not need 40 grand a day. And you beat the big players hands down when it comes to efficiency, as they have a big bureaucracy to manage. Millions swept away just in management. When you only need to manage yourself, it’s cheap, or at least it can be.

I mean this is a complicated subject, and I guess it all depends…

Gyutae Park on April 27th, 2009

Hi Kaj,
Thanks for your thoughts. You mention that smaller players can still play in competitive markets. I would have to disagree. Imagine starting up a sneaker business that went head on with Nike. Sure, as a small player, you need less sales, but who says you’re going to get them? Why would anyone pick your shoes over Nike’s? Nike has a huge trusted brand, and that in itself is an enormous barrier to entry.

My philosophy is to start small and dominate a niche. You can always expand from that point forward with much better success.

 
 
Evan on April 24th, 2009 Subscribed to comments via email

I too have the problem with implementing this. How do I know what is too big or too small. Especially when the differentiation can just be the bloggers voice/style.

I have a blog on health in general (there are few of these – does that count as niche?). I have just started a new site on authenticity (definitely a niche I think) but how do I know if this is too small.

My guess is that with some topics more people are looking to buy than with others.

I realise that hard and fast numbers are impossible to give (too many variables). If you could do a follow-up post that gave some guidance about this I’d be very grateful.

Gyutae Park on April 27th, 2009

Hey Evan,
I’m not sure that the blogger’s voice and style is enough of a differentiation. You’d need to actually target a specific audience or drill down to a subtopic.

For example, with your general health site, what topics are you focusing on? Who is your ideal reader? Once you figure this out, you’ll be in a much better position to focus in on a niche.

Authenticity is definitely niche, but it’s not very clear cut as some of the other options. I think that a big hurdle in that case will be to sell the idea to your potential readers (i.e. what it is, why they need it, and how you can help).

You’re on the right track, and with enough testing and action you’ll discover the niche that’s right for you. Good luck!

 
 
Lance on April 27th, 2009 Subscribed to comments via email

Hi Chris,

Good article. thanks.

I thought I had gone too niche with my blog site, but after 3 months of being live, my site (for a Bulgairan ski resort called Bansko) is getting good traffic with good feedback comments…and I think it would be hard for someone to do a similar site now.

Lance

Gyutae Park on April 27th, 2009

Chris? Who’s that? :P

A site for a Bulgarian ski resort sounds very niche, but I’m glad that you’re seeing success with it. Travel and tourism sites in particular are very effective when they target specific areas and audiences.

 
 
Sleepless in Sacaramento on April 28th, 2009 Subscribed to comments via email

You know, I wouldn’t have thought to specialize and expand from there thanks for pointing out the rationality for doing so. Like one of your other readers said, it seems as though the niches I am interested in are pretty well populated. I have some other ideas but I worry that they are too specialized and not enough traffic would reach me. Gyutae, I will definitely take into consideration your advice.

Gyutae Park on May 5th, 2009

If you’re worried that your potential niche is too specialized and doesn’t hold enough traffic, use the Google Keyword Tool to look up search frequency. That will give you a good idea of what’s in demand and what’s not.

 
 
seobro on April 28th, 2009 Subscribed to comments via email

Well, we are told that in our early 90′s it was the “Golden Age” of the internet and much easier to get ahead because there was less competition. That said, I found that in that time, few understood the net.

Actually, many said it was “dirty” to sell over the net. They did not want to “ebay” their web site. Back then Altavista was the big engine.

OK, now people realize that selling is needed as bandwidth cost money and ranking in top ten is essential. To tell you the truth, back then few people were aware of how important it was to rank on the search engines.

They did not see the internet replacing yellow pages, newspapers, etc…..

Gyutae Park on May 5th, 2009

Hey seobro,
Good points. There will always be purists out there who don’t believe in making money over the Internet, but these people are clearly missing out on an opportunity of a lifetime. Of course you don’t want to be shady and take your marketing over the top, but it’s important to adapt to the times and use all of the available channels to effectively gain exposure and profit.

 
 
Graeme Franks on May 3rd, 2009

2 Quick thoughts.

1) I love the idea of creating or tapping into a Niche but my challenge is finding the niche. More articles and success stories on how people have actually done that would be really helpful.

2) It seems to me that a lot of people who have had success in creating niches have STUMBLED UPON THEM ALMOST BY ACCIDENT! I feel like it’s hard to account or plan for “accidents” like that. The concept of “twitter” was just a hunch. They didn’t search for Key Words! Here’s an idea for an article that would be helpful: 5 Ways You Can Tap Into Your Hunches or 5 Ways of Knowing Your Hunch is a Good One.

Gyutae Park on May 5th, 2009

Hey Graeme,
Thanks for the comment. Here are some of my replies for your questions.

1. It’s funny you say that. I’m launching a membership site focused on online business niche selection which will have case studies and strategies for effectively find the right topics. Definitely subscribe to the RSS feed and get in on this when it launches in about a month. I promise that it will be worth your while. :)

2. My philosophy is that there’s no such thing as an accident. These people found success because they put themselves in a position to find golden niches. Action brings clarity – the most important thing you need to do is research and get started. You’ll never be sure of your niche until you make money and see success.

Hope that helps!

 
 
Laura on May 3rd, 2009 Subscribed to comments via email

Really good article – I’ve been reading a lot about niches lately as I’m trying to figure out some good ones. I was actually thinking that internet marketing is already too big (competitive) of a niche. Just curious what you had to say about that. . .Laura

Gyutae Park on May 5th, 2009

Hey Laura,
Internet marketing is very saturated of a niche and unless you have extensive experience, it’s probably a good idea for you to either focus in on a subniche or something entirely different. It really depends on your personal strengths as well as your website/business idea.

Check out my post on why you should stay away from the Internet marketing and make money online niches.

 
 
Kayvan on May 4th, 2009 Subscribed to comments via email

Thank you for the great article!

 
Kahoong Lee on May 4th, 2009

Keyword research is the most important and critical steps before we can start a niche. In my opinion, target smaller niche which pays about $1+ per click, higher search volumes (1,000-5,000), but lower competition (lower than 500,00) would be best. I think this is what everyone going to target but it takes times while doing keyword research.
Great article Gyutae, it’s my first time here and I’ll be here more often in coming days. :D

Keep in touch!

Regards,
Lee

 
save gas on May 6th, 2009 Subscribed to comments via email

My save gas niche is pretty small right now with gas prices low but when gas prices rise as we all know they will I will be ready I already rank in the top 5 for save gas and on Google and MSN 11 at yahoo. Wish there were some real products to sell too many scams in this area. I am going to start expanding the search out and get the other save gas terms and put more work in to this site I started just before the gas prices droped I have plenty of time as it will be awhile before prices rise again but I will be ready

Any ideas what I can do with it now to make money?
I going to blog about up come gas saving cars like the ford focus hybrid do reviews of the smart car etc…

 
Ecommerce Help - Tyrone Shum on May 7th, 2009

During my short time at the web, I too think that Niches are great and gives you bigger profits.

Niches can give you less competitions and also a higher demand.
I also think that niches gives you the oppurtunity to become a ‘leader’. Apart from that, I think you will be more recognized in your chosen firm sinec you are really focused on it.

However, some disadvantages are very high in risk, since once your chosen industry goes down, logically speaking your niche will do too.Apart from that sometimes you also lose oppurtunities to enter something new since your concentration is on your niche.

But either way, these advantages and disadvantages will depend on the way you try to mingle with your niche.

 
Guided Meditation Teacher on May 12th, 2009

Great article. Found it at the perfect time. Look forward to applying your tips in my sub-niche.

 
max on June 2nd, 2009 Subscribed to comments via email

I have to agree you with on this one, my niches are starting to pay off really nicely now! :)

 
Raza on June 3rd, 2009

Ever since I read the “4 Hour Workweek”, I was convinced that going niche is the best way to go. Also, you can create niches like he explained about the girl doing “yoga for rock climbers” My question always was how to scale your niche up once you’ve established it.

I have been into martial arts since I was a kid and have thought about exercise and fitness programs for martial artists, so I honed in on isometric exercises” as a way to build strength. I’ve set up a blog and am building organic traffic to it. There are about searches/day for this term so I think I can get a good chunk of that if I build good enough content. My next challenge is to build my site around other relevant keywords and then hopefully scale up. I’m testing an affiliate offer right now and plan on creating an info product as well.

 
eric tan on June 8th, 2009 Subscribed to comments via email

You just gave me an idea for a niche market opportunity… THanks!

 
Haley on June 19th, 2009

Good to see someone putting out some decent info on the best way to go about niche and affiliate marketing, even better when it’s free and no optin to read the other half of it.

dominating niches can be so daunting and difficult to achieve that sometimes you feel defeated before you start.

Thanks for the info,

Hayley

 
gerald | link company on December 14th, 2009

Good news that someone is putting out some useful info on the best way to go about niche. Your niche could make you a leader.

 
Learning to Play Piano on January 26th, 2010

There is an easier barrier to entry when you deal with smaller niches as opposed to the large niches. Take for instance the new rage of XFactor sites.

Anthony

 
Chris Peterson on January 27th, 2010

Blogging is a new buzzword today, although not very new but yes it’s new for the people like you and me who have entered this field. You can blog about almost anything you had like only criteria being that you have to make it attractive for readers to read. A decent looking blogging website and search engine optimization is all it takes to be a professional blogger in the field.

 
Name (required)
E-mail (required - never shown publicly)
Website
Your Comment (smaller size | larger size)

Trackback responses to this post

Gyutae's Top Picks

Recent Readers

Blogroll

Connect with me