To be profitable, there has to be:

a) Demand

b) Good affiliate programs you can promote (also high bids at the Pay Per Click Search engines is a good indicator).

To find out this information, I use Wordtracker and affiliate networks like Commission Junction.

Let's take the example of two potential niches and see if they are profitable. The niches I have chosen are "electric toothbrushes", and "hair removal".

Let's check Commission Junction (CJ) first.

Once you are logged in, click on "Get Links".

Select Links from the Search drop-down box, and type in hair removal into the search box.

Looking down the advertiser list of the results, you will see that there are several merchants offering hair removal products.

Click on the 3 Month EPC link at the top of that column to order the results by EPC. Those top performing ads look great. Check out the advertisers by clicking on the Advertiser link for any particular link.

(EPC is the amount of money the average affiliate makes per 100 visitors he sends to that merchant).

I clicked on Folica.com to see more information about that advertiser. Look at the EPC for the advertiser as this gives a better indication of overall advertiser performance than individual links.

A 3 month EPC of $17.63 (at the time of writing) means that for every 100 clicks from affiliate sites, the affiliates average $17.63 commission. Anything over $10 is good. You can also check out the 3 month trend for the advertiser. In this case, Folica.com have a very consistent EPC.

This is a good niche as long as there is demand.

Repeat the above steps for my other potential niche "electric toothbrushes". This time, just type in "toothbrush", not "electric toothbrush".

There are a few merchants there, but they are either new, or don't have any EPC data (at the time of writing this book). This lack of any clear data starts alarm bells ringing in my ears.

However, just to make sure, select "Products" from the drop-down search box, and type in toothbrush.

Ahh, now we have something. There are some novelty toothbrushes, and normal electric toothbrushes. Click on a few of the merchants and check out their EPC. When I checked they were a little disappointing, so I would rank the profitability of the toothbrush niche quite low.

I know I can find electric toothbrushes at Amazon and promote them from there, but Amazon has a very low commission rate.

Of the two, hair removal seems the better option. I hope it has a high demand.

Let's check demand

I like to carry out a couple of tests for demand. Firstly I'll check how many competing pages there are at Google for my main phrase. The higher the number, the more demand (since other webmasters have chosen to create pages on the topic). Secondly I'll head over to Wordtracker and check to see how many phrases are used to search for my niche. As I wont be able to compete in Google for my main phrase, I need to make sure there are sufficient phrases I can rank well for.

Let's look at this in detail.

1. Head over to Google and do a search for hair removal and electric toothbrushes,

hair removal - 25.6 million competing pages. electric toothbrush - 1.96 million.

(These figures were accurate on 13/02/2006. Click the hyperlinks for the two phrases to check what those figures are today).

OK, hair removal is looking promising.

Now head over to Wordtracker. Wordtracker in my opinion is the best tool for carrying out keyword research. I don't personally rate the accuracy of the Overture suggestion tool (and all keyword tools that use it for demand figures).

Login to Wordtracker.

In the Multiple Search section, click on Compressed search.

Type in hair removal, and select 500 from the Number of Results drop-down box.

Click Proceed.

When the results are all displayed, you will notice that 500 results are returned. This is good as it means that there are a lot of potential phrases for this niche.

Now for a little trick I use.

Scroll to the very bottom of the page. The table gives you the "Count", and "Predict" figures for each word.

At the time I checked, the count and predict figures were 10 and 12 respectively for the last phrase in the list.

This tells me there are a lot more phrases than just this 500. Correctly carrying out keyword research, will yield thousands of potential phrases for this niche.

As a benchmark, anything above a 5 for the last phrases in the results (assuming 500 results were returned), is a good indicator to me that the niche has a lot of phrases to target. The higher the value of the count for the last phrase in the list, the more phrases you will find for that niche when you carry out your in-depth keyword research.

Want to see an example?

Type in insurance and select 500. Scroll to the bottom. The count figure when I checked was 180 for the last phrases in the list. That means there are a huge number of potential phrases for the niche of insurance.

Another example. Type in barbie doll. The last phrases in the list has a count of 3, which means this niche has far fewer potential phrases than the insurance niche.

A final example. Type in cadbury chocolate (the best chocolate in the world in my opinion).

Only 52 rows were returned when I checked (not the 500 that were obtained in the previous examples), meaning this would not be such a good niche.

Before finishing our profitability and demand research, there is one other check I like to carry out. How much are these phrases attracting at the Pay Per Click search engines?

Type in hair removal at Wordtracker again.

Scroll to the bottom.

Click on the perform a competition search.

Select Overture and click the proceed button.

You will need to type in the security code displayed, into the small box before you can get the results.

Scroll to the bottom of the results.

At the time of writing, the top bids for hair removal related phrases were nearly $40.

Wow. Companies are prepared to pay nearly $40 per click at the search engines for some phrases related to this niche.

This niche is hot, and potentially very profitable.

Putting Adsense on our site could prove VERY profitable.