The first factor on the list and perhaps one of the most important to consider is whether you have an actual affinity with it. Is it something that you are passionate about, have an interest in, already experienced in and are able to offer detailed knowledge of? If so, you will be able to relate to your prospects and customers more naturally and easily than if you are entering a market cold. But that does not mean you must have an affinity with a potential niche market. If important fundamentals such as the level of competition and current traffic levels do suggest that there is an apparent gap in the market, then don't be dissuaded by not researching further solely due to the fact you are not familiar with the subject.
The next factor relates to the size of the market in question and whether there are any discernable trends. If there are a huge amount of searches coupled with high competition, then it is probably a good idea not to progress interest much further, unless such a topic can be split up and sub niched down to quite a small level. What you want is a niche that attracts enough but not too much targeted traffic and some competition. If there is no competing websites, then ask yourself why, it could be that there are no earning opportunities to exploit. It is important to establish if the niche has any seasonality such as the obvious one of Christmas where there is a lot of activity squeezed into a short period then the rest of the year is very quiet.
You must determine the churn rate of prospects and customers in the niche. Put simply, it is the estimation of thew number of new prospects that you attract, how long that they stay for and how many you lose. Once you know the length of time a customer stays and how much they spend, you can calculate what an average customer is worth and how much you can spend in attracting them to your internet business in the first place.
Other important factors that have to be addressed include how reachable are your prospects and customers? If in the potential niche the majority of people are not computer literate or internet savvy then by offering information and a product range just through a website could well result in your internet business failing to get off the ground. Always create the easiest route for prospects and customers not just to find you but to do business with you also. In addition to this you have to also identify the niche's buying behaviour. Will it be a one time purchase or is it likely that they will return on a regular basis? Is it a niche that offers an easy opportunity for upsells and cross sells perhaps using affiliate products?
Once you have answered the factors that should determine your choice of an online niche market you will have undertaken very valuable research that will provide you with a solid foundation for building a successful internet business.
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