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If you have spent any time trying to build an online business you will at some point have had trouble deciding what to sell or promote. Unless you are lucky, your business success will depend largely on which market you decide to sell to. Much of the advice on internet marketing forums stresses that the fundamental part of building your business is to choose the right niche. What is a niche and how should you choose one? If you are just starting out or are feeling confused about niche marketing then this article is for you.

A niche is basically a section or part of a much larger market. Instead of focusing on a broad range of products or services a niche market focuses on smaller, narrow areas. For example, a company may decide to sell products for domestic pets. This is a large market that in order to develop and sell related products would require a lot of investment to achieve. Alternatively the company may research the broader market and conclude that there is a consumer demand for products that provide training for their pets.

Going one step further, the research indicates that the majority of these consumers have dogs. On this basis, the company should conclude that its resources can be best used by developing and marketing products that relate to dog training. This market research exercise is invaluable as it helps to quickly eliminate unprofitable and time-wasting business ventures and identifies a specific niche. By focusing on this particular niche, this company can maximise its resources on one or two products to gain maximum output.

Although this is a real world example, the same principles apply in your online ventures. Before you invest time and money you need to research the market that you want to sell to. There is a common misconception that to be successful online you should choose a niche that you are familiar with, have an interest in and are passionate about.

Unfortunately this is bad advice. There is no point in building your business around your passion if there is no market for it. It can be very disconcerting to spend weeks developing a product only to find that the potential market is very small or even worse non-existent.

So how should you choose your niche? Firstly, take a look at the real world. Examine television, listen to the radio and look at what is for sale in the supermarket and the high street. If a product is popular offline, then there is a good chance this will be true online. For example, have you ever noticed the number of commercials or magazines that are related to weight loss? Type the same niche into Google and you will see a large number of websites related to losing weight.

Once you have found a niche that demonstrates a demand you need to conduct some basic online market research.

Begin by entering your niche keyword into a keyword research tool. There are plenty of these available and they provide data on how many times a phrase is entered into the search engines on a daily or monthly basis. They are not completely accurate but provide a rough estimation of the level of demand in your chosen niche. Next, enter the same phrase into Google to gage what the level of competition is. By analyzing these figures you can begin to understand what niche topics can be penetrated easily.

Finally, you should assess whether there is money in the niche. This can be demonstrated by the number of paid adverts on the results page. If advertisers are prepared to spend money, it is only because they are also making money.