Discover If You Have Market Potential For Your Online Business Idea
|July 27, 2012||Posted by Louise under Online Business Ideas|
Wondering if your online business idea will work?
As a spinoff from a previous post that quickly reviewed three free online ways to assess your idea’s market potential, I’ll use both the Google search engine (Google SE) and Google keyword tool (GKT) to show you in more detail how you can determine if your idea has market potential. Because without a market to buy your offer, you don’t have a business; you have a hobby, as the saying goes…
It’s worth underlining before we get into “it”, that this is preliminary research in discovering if you have a profitable online business idea. How much research you need to do depends on the complexity of your idea. But at the very least this little article will get you started.
Sufficient for easy businesses to start
If your idea is simple, meaning it’s not time consuming, difficult or costly to produce and sell, then these preliminary Google findings may be all you need. If you’re brave enough, you could then use the market information you find to run a trial ad and watch the results. A process coined Minimum Viable Product (MVP) by blogger Eric Ries, which I’ll talk more about in another post. This test selling experience alone could reveal so much more than regular online market research, and as a result, get you selling to your market a lot quicker. And the less amount of time and money you use to start selling your offer, the less risk you face in launching your business.
Chris Guillebeau, travel entrepreneur and author of The $100 Startup, a book that lists best practices and stories from 1500 startups for those who want to start a business, describes how running an ad as a way of testing the market worked for one of his success stories and stresses the importance of finding a market:
Maybe you won’t do it that way, but make sure there is sufficient demand for your product or service before spending your whole life working on it. That’s why it’s so important to get started as quickly as possible and why the first sale can be so empowering.
Starting Point For High Maintenance Business Ideas
Alternatively, if you’re idea demands lots of effort and money to produce and sell, and is on a grander scale, then you’d be wise to take more time and drill further into your market research, beyond what’s described in this article. A lot more is at stake in this scenario. But this article will still provide you with a starting point from which to springboard your research.
How useful is Google in finding market potential?
An article in Inc.com on testing ideas says:
While it may seem obvious, using Google and other search engines can be an effective way to gauge the potential market for your idea and whether or not you’ll be facing competition. “Believe it or not, you can do a simple keyword search using either Google keywords or any reputable marketing software such as Market Samurai or Magic Bullet to see if your idea already has a demand,” says Jesue Walker, a serial entrepreneur and president of The Ultimate Emergence Company.
In the article, Jesue Walker goes on to explain:
Once you have the keyword results in front of you, click on them and pay attention to the right column of the search, which lists the paid advertising. “Click on each of these and see what they are offering,” says Walker. “This is your competition, if any at all. Going back to the search page or keyword results and [seeing] how many times a day and week this keyword is searched for…is the beginning of finding out if you can gain at least one percent to two percent of this market.”
So, as Jesue tells us in the above Inc.com article, using the Google SE and GKT reveals two important criteria for market potential:
whether there is an already existing demand for your idea. If you see lots of search results and ads for the term you entered in the Google SE, as well as a large enough total of global or local monthly searches in the GKT (we’ll get into this further later), then you know there’s a the very least lots of interest. Is it possible a portion of this group is willing to pay for your related offer? Well, you have to look at other factors.
Here’s a screen shot of a Google search for “photography course”. The results revealed two interesting points:
- There are over 332 million results (not showing in the image), which represents how many sites are populating this list. These are websites like yours competing for space in the rankings under this search term and it’s related forms.
Don’t let the number of competitive sites scare you away, because it’s not a true indicator of how difficult it would be to get your site on the first pages. You have to take into account the broad nature of your keyword (searched term) and the types of websites listed. For now, it’s simply an indicator that the term is probably searched frequently enough to generate so many results, which is good. We want that, because the searchers are potentially part of our market. We’ll get more precise numbers in the GKT. Meanwhile, there are other clues in our results.
- As you can see, tons of ads also appear in the results, which I indicated with red arrows. So, in this case, if you were considering selling some sort of photography course, you’d be encouraged because these results indicate lots of companies paying advertising fees to have access to customers. In other words, these advertisers believe there are customers.
Now, you may be thinking numerous advertisers does not indicate buyers, but rather the number of sellers. Yes that’s true. But, that’s only half the story. It’s like a tap. You see one and you immediately think water. But it’s possible that tap doesn’t work. Maybe the plumbing isn’t connected or it’s on display in a hardware store. But in most cases, it’s a likely indicator of water just as advertising is usually an indicator of a market. The value of that indicator depends on the context, such as the competitor’s angle, the part of the market it dominates, its budget, etc.
On the other hand, a few to no advertisements would be more worrisome as it’s showing you that entrepreneurs already in the game have evaluated this market and found it unworthy of spending advertising dollars.
You could argue that your idea, being so new and unique, explains the non-existent market. Anything is possible. But with over 2 Billion people on the internet, chances are the idea popped into a few other heads before, and they estimated the task too difficult and costly to undertake.
John Warrillow, author of Built to Sell, explains this well in his article in Inc.com:
I do some angel investing, and I get a little nervous when people say there is “no competition” for the idea they are proposing. The market has a funny way of sorting out the good ideas from the bad, and if there is no competition for your idea, chances are, there is no market either.
Companies succeeding in doing what you’re proposing is a good sign—the market has validated the core of your idea. Instead of reinventing the wheel, all you need to do is take a concept that is working and find a small corner of the market to dominate.
So, don’t second guess lots of advertisers in your search results. Not at this point. You want competition because again it’s an indicator that a market exists, which will make selling your offer a much easier and quicker process.
Which brings us to the second important criteria that using Google SE and GKT reveals to us:
competition intel. The GKT will let us dig deeper into our initial search results and tell us more about our competition. Here’s a screenshot for part of the GKT results for term “photography course”:
In these GKT results, we see:
- both high Global Monthly and Local Monthly searches. This confirms our assumption earlier that we have a large number of searches and lots of interest in this topic. But are they buyers? Let’s keep looking.
- There’s lots of high competition as indicated in the Competition column. This means a high volume of companies interested in your market are paying for advertisements (Adwords) that contain this keyword phrase. This to me is an indicator of buyers. But let’s keep looking…
- The approximate CPC values are also high. CPC means the average cost-per-click advertisers are willing to pay when someone clicks on their ads. As an indicator of a profitable market, these results are positive. They say to me that we have a valuable market if many companies, who have also done their market research, are willing to pay on average $10 or more per click when someone clicks on their ad and visits their site. Would they bother for a market that doesn’t buy? But the high CPCs also says we have some heavy players, so unless I have a big budget to jump right into the mix, I’ll have to find my own unique angle so as to not compete directly with the big guys!
How To Find Your Unique Angle?
By going back to your Google SE results and clicking on the ads (or to save them money, enter their ad’s web address in your address bar), you can visit competitor sites and collect valuable information on their corner of the market:
- who are they selling to;
- what kinds of problems do their customers have that they are solving.
Then, use this information to find your own unique angle and corner of the market. Of course, there are other methods to developing your angle, but I’ll have to discuss that further in another post.
So, as you can see, Google SE and GKT provide tons of clues to help you determine if your idea has market potential and whether it’s an easy and a good business to start.
Just remember, that jumping into a new business with a market already in place will save you time and money as you won’t have to find or create one of your own. Plus, starting quickly and small with less money and effort, will either win you sales quickly or get you on a the path of a new and better idea with minimal loss.
What do you think? Do you use Google SE & GKT to research your idea’s market potential? Do you know of other free, low-cost, or easy to implement methods that are helpful in exploring your idea? Leave a comment.
Love what you do!
Want to read more? Get your free weekly SAOBiz Doing What You Love Newsie