Targeting niches with tailored software is a perfectly rational -- and, dare a say, I good -- strategy in those cases where you want to build a product that will support (only) yourself economically. And you don't have 'Pinky and the Brain'-esque fantasies. I know it is hackneyed, but bingocardcreator.com is a fantastic example of this strategy put into practice.
Often, as these niches aren't already served by a professional product, there is obvious space for monetization. There are also good opportunities to develop quick expertise in that niche -- and as a result corner the market. To boot, as the consumer base is smaller, you can often develop long-lasting, personal relationships with your customers more quickly and more easily.
Of course, if you want to take the Internet by storm, don't build a repository of crochet patterns, but if you want to see some quick money roll in (or build up some basic business experience), I but don't see why you shouldn't. Advice has to be viewed within context.
Blanket statements are antithetical to intellectual nuance.
Not everything has to be New York; sometimes the Galapagos Islands are quite enough.