Tell me more ×
Answers OnStartups is a question and answer site for entrepreneurs looking to start or run a new business. It's 100% free, no registration required.
up vote 1 down vote favorite
1

I'm making a software for a very small and specific market. Worldwide, the numbers seem good. That is, there is a possibility for business. Nevertheless, I wanted to post my procedure. The question is simple: is this right? would you consider this valid?

I first looked for data in the US census information. There I learned that the sector I'm interested in makes X amount of money per year. But I'm not aiming to the whole sector, just a small portion of it. To calculate the portion, I went to google analytics and found the relationship R between searches looking for information related to the whole market, and searches for keywords related to my more specific market share. I then assumed that the market share for my product is X*R in the US.

Then, I would have to estimate a realistic share of that market that I can get (100% is not realistic, ever), let's call it S, so that my final magic number (in the US) is X*R*S.

I'm aware that I may be dead wrong. But is that probability high? would you count that as valid? would you bet on it?

share|improve this question

1 Answer

up vote 1 down vote accepted

I don't think this is a great method of measuring market size. Factors I don't see accounted for in your method:

  • cost of services / products in your niche vs cost of services / products in the larger market (even if searches for your niche products are 1/10th of searches for the larger market products, they may only account for 1/100th (or who knows, 1/5th) of the amount of revenue the market is generating as a whole. It depends on everything's cost.)
  • non-search sales channels for the market. Particularly within a broader market, non-search channels like display advertising, direct sales, etc. can drive larger amounts of sales.
  • non-product revenue from broader market companies. Larger companies have more opportunities to generate revenue not directly related to their primary-market products. Census data isn't going to separate sources of revenue; they're just tallying total revenue from companies in the market.

That said, while I don't think niche to broad search traffic ratios are a good method for determining market size, niche market search traffic alone isn't a bad indicator of market opportunity. Think about how you could validate the opportunity through ads leading to a pre-sales page.

Also, make sure you're looking at exact-match search counts in the AdWords keyword tool, not broad-match, otherwise your estimates of how much search-traffic these keywords are getting will be vastly inflated.

share|improve this answer

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.