In our “Jill Launches with SpyFu” case illustration, Jill is onto an idea for her own commerce site and wants to know where to narrow it down.

How you find a niche differs if you sell products vs. acting as an affiliate or selling Adsense.  In this particular case, we will show you how to qualify your niche idea and help you spot any areas of concern before you commit.  Use SpyFu to measure these three areas:

1.       Competition

2.       Trends

3.       Overall daily ad budget

Competition

Don’t be afraid of competition-it’s actually a good thing.  Steady competition is a strong sign of sustained business.  Buyers are coming, and no one business monopolizes the pool.  There is money to be made here, and that’s exactly what you’re looking for in a niche.

Healthy competition doesn’t mean heavy competition, but just one competitor is too limited a pool.  Lean toward a niche that is slightly more saturated.  You will still need to set yourself apart, but the key at this point is to determine profitability.

Trends

SpyFu’s graphs highlight trends for keywords and domains that tell you more about what is going on in that niche.  Let’s say that you’ve typed in the keyword “scrubs” and get the statistics on that keyword.

You see that there are 20 advertisers currently buying that term.  Click on the graph next to that stat for the bigger story.

By graphing these statistics, you have a clearer understanding of what has been happening with that term (or domain) over the past few months.  Trends like that help point to changes in the niche that might be a good time to get in (or a clear signal to stay away if numbers are steadily declining.)

So in this case, aside from a short dip at the beginning of the year, the number of advertisers on “scrubs” has remained very consistent for two years.  Our character is fictional, but this real example shows stability on this keyword.  Review related terms like “nurse uniforms” and “medical scrubs” before drawing a final conclusion.  Remember, a niche is never built on just one keyword.

Overall Daily Ad Budget

Your ad expenses must be lower than your net revenue to prove profitable.  That part is simple.  What is as clear is that not every click equals a sale.  Determine your own estimated conversion rate to learn how many clicks you need before you can get a sale.

The overall daily ad budget on SpyFu is an estimation of what a domain spends.  We never steal private account information, so these ranges are built from factors like average ad position, clicks per day, and cost per click.

Look at competing domains in your (potential) niche.  How much are the top advertisers spending per day?  Gather the ranges of the most consistent competitors in that niche and determine if their ad budget ranges are within striking distance of what you expect to spend.

You don’t need to be left in the cold if your budget falls just shy of these ranges.  Spending a close amount, just shy of the average range from most of your competitors can actually be a productive strategy for you at the start.  Read about finding the right position to get more from a limited ad budget.