Market Selection

The market I’ve selected to tackle for our nothing held back “idea to profitable online business” project is “worm farming”.

I received quite a few emails from readers thinking this was quite an odd ball market to enter, but there is logic behind Duncan’s madness (sometimes).

Firstly what is worm farming?

Worming farming is the “complete process” behind breeding worms, either as a hobby for the individual gardener, or as a business on a commercial scale.

Worms produce two types of fertilizer, the castings that collect on top of the soil of a worm farm, and a liquid fertilizer that is collected below the farm as moisture passes through the soil. Both of these forms make excellent natural fertilizer for your garden.

In addition, worm farming is an excellent alternative to standard compositing, allowing a house hold to eliminate food and paper waste (and generally any other waste they would throw into the compost bin). It is promoted by many regional and local councils as such.

Do I have any personal interest in worm farming?

No, not really.

I have always had an interest in ecology and actually did an environmental studies degree at university back in ’98, but that is the extent of it. I also live in an apartment with the only outdoor area being a 2 x 3 meter deck so have little room to begin a garden, let alone a worm farm. Heck, who knows, I might just start one during this project to get my hands really dirty in the market.

The reason I have selected the market is a result of the processes I use to analyze how competitive particular markets are online, and because of the type of business I wish to set up.

I want to be able to deliver a digital product so I do not have to deal with product inventory and fulfillment. It will also enable business automation as much as possible with automatic ordering and product delivery.

In that respect the product I wish to deliver to the market I decide to proceed in will be an information product. More than likely this will be a “How To…” guide, with suitable bonuses to help add further value.

In addition, depending on the lack of a “central community” around the market, and the potential to add further value to the offer, it might be possible to extend that into a monthly or annual paid membership website.

Ideally I would prefer this option as it would create recurring income. Aside from the obvious benefits of that, it would add even greater value when I decide to sell the online business.

Again, as I said, this is an “as I go from step one” project, so I’ve yet to actually decide on the form of product aside from it being digital information. All I have decided on is that I will employ a ghostwriter to create it for me (something which I know you’ll be interested in learning the processes behind as this project moves forward).

I should mention that in the interest of this project being completed within 6 to 8 weeks (to the point of hopefully making sales that is), last week I employed a ghost writer. We have yet to do anything substantial other than discuss the project itself.

As I write this, he is busy creating a potential structure (a draft outline of the “how to” manual which we will then move forward with). I will talk more about this whole process in the near future. I just don’t want to mislead you with any unrealistic time frames if you think this product development thing appeared to happen overnight when it’s introduced to the website in the near future.

Right. Onwards.

So the market selection process I use is as follows…

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1) Create a list of ideas for potential niche markets.
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This is a brain storming list of potential ideas that I could produce an information product around. Things people want to know more about. Things people want or need help with. On this list of ideas I had such potential niche markets as bee keeping, worm farming (obviously) and others.

I’m not going to go into them all as it’s not necessary. As to how I thought about them, ideas usually pop into my head when I’m walking down the beach or whatever. I actually recall my uncle was interested in worm farming years ago and I’m pretty sure that’s how that idea popped on the “to research” list. One excellent point of call to generate a bundle of potential ideas is to browse through the entire non-fiction section of your local library with a pen and paper. Take a look at the categories and topics of books contained within.

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2) Investigate The Demand
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Once I have my list of ideas I then need to figure out if people are actually searching for information related to those niche markets.

The first point of call I have for this is called Keyword Domination.

To keep this short it’s a membership website that contains a database of over 20 Billion keyword terms updated every month. It’s as easy as hell to use, and as you might imagine with that number of keyword terms in it’s database, it provides you with very in-depth keyword reports.

You plug your target keyword term into the application, in this case ‘worm farming’, and it will take a few minutes to search the database. When complete an email is sent to you and you then login to download your keyword list as comma delimited text file (which you can then open in any spreadsheet program to analyze).

In addition to all keyword terms containing your initial entry phase, it also provides monthly search volumes and estimated clicks (assuming you make it to the top positions on the search engines for those terms).

Here are the top five results it returned for the terms ‘worm farm’ and ‘worm farming’ (including search volume and estimated clicks)…

worm farm    7454    5174
worm farm at home   219    152
earth worm farm    106    74
instructions for building worm farm 68    47
smiths worm farm   61    42

worm farming    6479    4497
commercial worm farming   769    534
earth worm farming   736    511
worm farming business   601    417
worm farming profits   530    368

…worm farm returned a total of 211 individual keyword terms, worm farming returned 87. A quick interesting observation about the above… more people search for worm farm in comparison to worm farming, and more people search for earth worm farming rather than earth worm farm. That was a mental note for when it comes time to target keywords for search engine optimization.

Ok so we can divide the figures there by 30 to give a rough indication of the volume of visitors we might receive on a daily basis if I can achieve a top ranking for the term “worm farm”. That’s 248 searches per day (with 172 estimated clicks as a result) from the English speaking (or rather searching) world. Not the largest market but there is demand none the less.

If I could achieve 172 unique visitors per day, create a sales process with a conversion ratio of 1%, that would equate to 1.72 sales per day. That’s 51.6 sales per month. With a $97 price point (just crunching numbers here), that would be $5,005 per month gross income. Not too bad.

Obviously the above is basic estimating and is by no means a limitation (nor a guarantee we will see such results). I have simply used the most targeted keyword phrase here as these are the most targeted potential customers. They are actively seeking information on worm farming on the major search engines.

In addition to this, worm farming has a wider appeal to the “gardening” market, containing people who are looking for ways to increase their crop yield and / or remain organic gardeners and so on. So the potential market interested in worm farming is considerably much larger. At some point in this project we will begin marketing to this wider audience which should be fun.

Why do I use Keyword Domination?

I find it the most thorough tool in terms of depth of keywords returned, it’s dead simple to use and it’s fast. Plug in all your keyword terms, let it do its thing for an hour or so (if you’re researching a lot of terms at once), then come back to download your lists and analyze them. It also gives highly accurate search volume estimates. 

I’m not going to go into alternatives you might want to use. There are plenty out there so you can use what you like, but this is what I use and recommend because it’s fast and in depth…

Keyword Domination.

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3) Investigate The Search Engines
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Now we know there is demand.

The next thing I’ll do is begin a thorough search on the major search engines. Google, Yahoo, and MSN with the majority of my focus on Google. Here I am looking for several things.

I’m looking for competition in terms of the volume of existing sites about “worm farming” and how well they have been optimized for the search engines. Google returns 900,000 results for the search phrase worm farming…

http://www.google.com/search?hl=en&q=worm+farming

…however this shows all sites that include the terms ‘worm’ and ‘farming’ in no particular order. That is they mention both terms somewhere on their website page, but not necessarily next to each other. So we make an exact search on the term by placing quotes around worm farming and we see there are roughly 91,500 websites that mention the exact term…

http://www.google.com/search?hl=en&q=%22worm+farming%22

Not much competition at all in the big scheme of things. To give you some perspective, “bee keeping” returns 455,000 results, and “weight loss” returns a whooping 43 million results.

That bee keeping one is interesting.

In a side by side comparison of the Keyword Domination results for both ‘bee keeping’ and ‘worm farming’, they are extremely similar in terms of volume of monthly searches being conducted.

There are 7,183 monthly searches for ‘bee keeping’.

There are 7,545 monthly searches conducted for ‘worm farm’.

The important thing to note here is that in order to receive any decent exposure in the search engines for the bee keeping market, you would be competing with almost five times the volume of websites to return the same volumes of traffic.

That of course doesn’t mean it’s impossible, simply more “search engine competitive” and it will take more time and investment in order to achieve decent ranking results.

In addition to basic analyses like this, I am looking to see how well websites are optimized to rank well in the search engines.

What is making the top 10 websites here rank well for the term worm farming?

How easy is it to replicate that?

How easy is it to better that, to ensure I can achieve a top 10 ranking?

So I will analyze the top 10-20 websites that show up for the term worm farming. 

Without going into the onsite website optimization factors, I’ll explain a quick technique I use to see how aggressively the sites have been optimized specifically for the search engines.

(I’ll discuss the onsite website optimization factors in a future letter as I actually build www.wormfarmingsecrets.com so you can see every onsite search engine marketing element I do there).

I’m going to take a look at the Google Page Rank (PR) value of each of the top 20 websites and their incoming link popularity.

The idea here is to find an average value for both factors here. This will give me an indication as to what type of Page Rank value I need to achieve, and the respective number of incoming links I will need to build, in order to compete with the existing top 20 websites. If you don’t know what Google Page Rank is, there is a good explanation of it here…

http://www.iprcom.com/papers/pagerank/

…but to try and sum it up as simply as possible… it’s the way Google ranks websites on a scale of 0-10. The greater the numeric value, the greater the popularity the website has in the eyes of Google. It is directly related to the number of incoming links a website has (link popularity), the quality of those links (from related websites), and the value of those links (the PR value of the pages the links are on).

There is much debate over whether Google PR still plays a vital role in search engine optimization. I’m telling you right here today that it does, and I’ll explain specifically why when we initiate the link building campaign for our worm farming project. Right now though we’re simply focusing on link popularity.

Although this process can be done manually, I use a tool called PR Prowler to pretty much automate the entire process. When you’re going through this whole niche market analyses for 20 or more potential niche markets to find the winner, it can take a heck of a lot of time if you do it manually.

Automating the data collection process can reduce weeks into days so you simply need to focus on the results.

With PR Prowler you enter your desired keyword term, in our case “worm farming” (using quotes to make an exact search). You then specify the number of results to collect and the minimum Page Rank value you want to find.

I select 20 results to take an average of the existing top 20 websites and set minimum PR value to 0 as we want to analyze all sites in the top 20 results.

You then hit ‘Prowl Keywords’ and the application will go out and pull in the top 20 results in Google for your keyword term.

In minutes it gives you…

a) The Page Rank value of each of those websites.

b) The number of outbound links each page has. This is the number of links pointing to other websites and / or other pages within the existing website.

c) The number of incoming links the website has from other websites (this is considered its link popularity). You can collect this data for both Google & MSN and I recommend doing both as MSN tends to show more back links than Google so it gives a better overall indication of what might be required for your link building efforts.

…you can then export this information to a comma delimited file to open in a spreadsheet and analyze. I’m not going to show you all of the results it returned here as this letter is getting rather long. However here are the results of the analysis which was completed in about 2 seconds using the “auto average” feature in MS Excel…

Top 20 results for the term “Worm Farming”:

Average Page Rank: 3 (Max was 5)
Average Outbound Links: 39.65 (Max was 142)
Average Incoming Links Google: 9.25 (Max was 147)
Average Incoming Links MSN: 21.15 (Max was 216)

So what does this tell me?

If I want to stand a chance of ranking well for the term ‘worm farming’ in Google, I will need to build approximately 22 incoming links (again use the MSN value as it is more accurate), obtain a PR value of around 3 (although not essential to the actual rankings of your site, it’s only going to strengthen them), and if I wanted to, I could link out to as many as 39.65 different pages (either other websites or internal pages) without too much detriment to rankings we achieve.

Of course these are averages and we don’t want to be an average website floating around somewhere in the top 20 results. We want to be in the top 3 and preferably number one. In that respect we take the maximum values as a target for our own link building campaign.

So we want to aim for around a PR value of 5, gain around 250 odd incoming links, and link out to as few external websites and internal pages as possible from our home page (to retain our PR values and ensure we do not impact on our ranking potential initially).

Again this is not set in stone. If you achieved exactly the above goals it doesn’t necessarily mean you’re going to shoot to number one for your desired term (there are many other SEO considerations still).

However what this does is give us another important aspect of comparison to use when comparing possible niche markets to tackle in side-by-side comparisons. Again, I’m not going to include the data “bee keeping” returned here but it is considerably much higher in terms of both averages and maximum values.

Also just because the above are the maximums, it doesn’t mean that once we have achieved them for project we will be stopping there. Nothing will help to strengthen and retain your top search engine positions more than continually increasing the number of incoming links to your website from external websites.

Moving on.

I then take a good look at the top websites (I’ll browse anywhere from the top 50-100 sites) to see what each website is actually about.

Are they selling products or providing information?

How many websites are selling similar or complimentary products?

Will they be direct competitors or potential affiliates?

Basically I’m trying to get a feel for the market place.

It is hard to describe how to compare markets when doing this, but after doing this for each niche market you’re researching,  you’ll hit a couple that just feel better than the others.

When doing this for worm farming I discovered a few interesting things.

Most of the sites were informational.

In fact a lot provided very brief ‘how to setup a worm farm’ guides. A proportion of these were local council sites, and others independent sites. I don’t consider these to be competitors, the ‘how to’ guide we will create will be much more in-depth and provide better overall value. These sites could make excellent affiliates (but it would be a struggle if not close to impossible to get government and local council bodies as affiliates).

Many of the sites offered complimentary products.

That is they were actually selling worm farming equipment and worms. These sites could make excellent cross promotional partners. In addition, it raises the possibly of sourcing some of these products (likely through a drop shipper) in the future and offering a packaged bundle on the…

http://www.wormfarmingsecrets.com

…website.

Another mental note.

I found a few discussion forums related to ‘worm farming’ (recall I am also looking to see if a community exists and if there is a need for one). These were not popular and were difficult to spot on the two sites I found them on. So there seemed to be places available for discussion but people simply didn’t know about them, or if they did, were not impressed enough to use them.

In terms of discussion forums, this almost always due to lack of current activity.

I was surprised that out of all of the sites I looked at, I only found two direct competitors selling information products related to worm farming. One site sold a downloadable book for $47, the other sold a number of manuals and DVD’s which were shipped as hard products or offered as digital downloads.

That told me there are people serving the market, but the extent to which they were buried deep down within the search engine results (and their apparent lack of setting up an effective direct selling marketing funnel and sales letter) left little for concern.

I actually saw the DVD website as a potential strategic partner in the future where I could possibly obtain the rights to the products, in order to bundle them with the product we are creating, or establish some sort of revenue sharing arrangement.

In addition to checking the actual existing websites, it pays to conduct related searches on popular affiliate networks such as cj.com, clickbank.com, shareasale.com etc to see what else is being offered in the niche market. That process is pretty self explanatory so I will not expand on that. It’s basic searching.

After reviewing all of the niche markets I was investigating like this, the worm farming market gave me the best feel, in fact I felt it was wide open for me to step into and deliver up the best worm farming source of information (and potential community) online.

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4) Paid Advertising Market
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In addition to the above methods, one further thing I will do for each niche market is check to see what the competition is like on the Pay Per Click search engines. (I recommend looking at both the Google Adwords program and Yahoo’s Overture.com program).

This will provide me with more important pieces of information to reinforce what has already been collected. It will show what competition is like in terms of paid advertising in the market, how much advertisers are paying and what sort of traffic they are receiving.

Even if you have no plans on using pay per click search engines it is worth while opening an Adwords account for such market research purposes…

http://adwords.google.com/select/Login

I will then use their “Traffic Estimator” tool which you will have available in your account under the tools section.

This tool will estimate average cost per click, estimated ad position, estimated clicks per day, and your estimated total cost per day to run your campaign. In order to get this information you need to plug in a keyword list, so I simply use the keyword list that we created with Keyword Domination.

This showed some interesting things.

It showed there were very few clicks on ads related to worm farming. Only 6 keywords returned any traffic estimates and they would provide a total of only 5-7 clicks per day. The average cost per click overall for these terms would be between $2.71 – $3.22 per click, with a total cost per day of between $20 – $30.

This was not very encouraging in terms of setting up a highly profitable paid advertising campaign for the most targeted keyword terms in the market.

However looking at the actual ads themselves (simply searching on Google and looking at the ads that appear down the right hand side), it showed the majority of advertisers had nothing to do with worm farming and were simply search engine sites (arbitration sites).

That looked more promising as it would allow me, if I chose to do so, to place a much more targeted ad that actually sends the user to proper worm farming information. So there would be room to wriggle in there with those and other keyword terms related to the wider audience if I chose to do so.

However I really only use this as another market research method (and have no foreseeable intention to setup a Pay Per Click campaign for this project – although may decide to do so in the future).

I tend to stay away from Pay Per Click campaigns due to their cost (not that you can’t make amazing returns on your investment). However I have techniques I use to generate what equates to highly targeted paid traffic in very competitive industries for less than $0.01 per visitor. Yes, I will share that technique with you in this worm farming project in the near future.

To help automate this part of the market research process even further, I use a tool called AdWords Analyzer. This tool will allow you to enter a search term and it will then find keywords related to the term (using the overture.com search query tool).

It will then show you the number of ads on both Google and Overture for those terms and if you attach the application to your AdWords account, will login and pull in the estimated cost per click information for you. Again, this makes life much easier.

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Niche Market Selection Summary
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So that’s basically it. When going through the above motions for each of your potential niche markets, laying all of your data out on the office floor and comparing what you’ve found, you’ll eventually discover which market has the best “feeling” to it.

In addition, it allows you to look at each market and decide whether or not you wish to invest the time, energy and money into succeeding in that market.

If you find several that look extremely promising, but one obviously has less competition in the search engines, has less paid advertising competition, has less competing products, but a considerable demand is there, then you might decide to pursue that market initially. 

It will be much easier to succeed in, rather than jumping head first into something ridiculously competitive such as the weight loss market.

So to recap…

- List of ideas & potential niche markets.

- Run keyword analyses tool to discover demand.

- Search on Google, MSN, Yahoo looking for competition in terms of volumes of sites and how well they have been optimized for the search engines.

- Analyze the off site factors that make the top sites in your market rank well (PR values, incoming links etc) for point of comparison and rough targets.

- Look for competition in terms of businesses selling similar or directly competing products, which in turn reveals potential affiliates, link partners, joint venture partners and other potential opportunities.

- Check Adwords and Overture.com to discover what the paid advertising sector is like in the industry you’re investigating.

- Rinse and repeat for each potential market then compare.

Tools I use and recommend:

Keyword Domination

PR Prowler

AdWords Analyzer

I guess I should also stress that it is important to do your initial research thoroughly. 

Research and compare at least 20+ different niche markets you might be interested in. Do not just jump straight in and attack the first market you’ve researched. It might not be the best market for you. As I mentioned I have no immediate interest in worm farming and I had no idea this would be the market I would target for this new project. It simply felt right and more easily achievable in comparison to some of the others I researched.

So what’s next for the project?

Over the next few weeks I plan on setting up a basic website optimized for the search engines on the wormfarmingsecrets.com domain, and start a link building campaign to the site to help with search engine rankings. The basic website will be a lead capture form in the premises of a worm farming newsletter in order to capture leads from all traffic arriving (and some valuable market research data).

In addition I will begin marketing the site using various other techniques to continually drive more traffic to the site and generate more leads, so when it comes time to introduce the product, there is already a potential customer list to market to.  And meanwhile in the background I will be developing the product to sell (well, I’ll be supervising the Ghostwriter) and recording the process to share with you in the future.

Best…

Duncan Carver