Ask HN: Estimate Market Size
When you are creating a new product, how do you know if your target market is big enough?
How big do you think it needs to be before creating the idea?
How big do you think it needs to be before creating the idea?
I personally think the easiest traditional way of doing it is called the break down method. This involves taking a total population, and then applying various percentages to whittle that number down until you got your target market. To illustrate, lets say you're selling an iPod hookup for cars. You're targeting US only so you have the total population n. You also know that x% of people drive cars and that y% of people own an iPod. To get your market size you multiply n by x and y--voila.
A less traditional way of doing all of this involves a little facebook hack I've been tinkering with. If you go through the process of creating an ad on their network, it will give you the number of users for the various filters you place on it (you can specify your demographic by location, age, sex, keywords, education etc etc). In certain areas of the world the % of people on Facebook is so high that you can basically use this figure as a solid estimation. I haven't tested this for accuracy but it works well enough for most purposes.
Be careful with the "we only need 1% of the market to make millions." You can fool yourself into thinking getting that 1% will be easy. Depending on the product, the sales channel is different. Focus on how many customers you can get to the top of your sales funnel. You loose a certain % of customers along the funnel and you end up with a certain number of paying customers. Even if the market is 5 million people, if you only get 100 in your sales funnel, then that is an issue.
If you are going with Adwords, there are pretty standard conversion rates you can follow to figure out how many customers you need to look at your product in order to earn X dollars a month.
If you have expensive product that requires a salesperson, then find out how many deals can get done in a day/month/year. Even if the market is big, but sales are slow, it doesn't matter in the end.
it depends what sort of market you're in and what you're doing. Because you're in this forum, I assume you're building an internet app and intend on receiving traffic from search engines and social sites.
You can use google keyword suggest or wordtracker to see how many people are searching for what you're making, and if anyone else makes it.
Yes this works for ISV products too.
the potential market should be at least 1 :) it depends what kind of company you're building.
If you're building a really large consumer business you want a product that can have over 50M users. If you're after a tidy lifestyle company you can dominate a small niche and thrive.
no idea really, look for some successful companies that have built upon other platforms... facebook games probably a good start.
From here, you'll have to figure out what percentage of the market you can reach, etc.