There are a lot of misconceptions out there about niche research. One of the biggest lies that even many experienced marketers buy into is that competition is determined by the amount of pages that are optimized for the term you are thinking about attempting to rank for. If you search internet marketing forums, you will find endless back and forth debates about the relative validity of determining the number of competing pages using the phrase in quotes versus searching the phrase preceded by the allinititle modifier. What rarely seems to get brought up in these heated debates between these two different methods is the following - neither of those really matter, in the final estimation.
That's right. That's what I said. Neither of them should be your final determiner.
Sure, they're a fairly useful guide. Obviously, a site with one million competing pages (whichever way you judge the competition) is going to be more difficult to rank for than a site with one hundred competing optimized pages. When you look at it in those broad strokes, it seems obvious.
Taking the extra bit of time to vet the pages in the top ten search results before beginning to chase a keyword will give you a much more realistic picture in your Taking the extra bit of time to vet the pages in the top ten search results before beginning to chase a keyword will give you a much more realistic picture in your niche rankings validity research than simply knowing the number of competing sites! research than simply knowing the number of competing sites!
However, where the grey area starts to appear is when you consider that a term with five thousand competing sites where the top ten are very well optimized can be much more difficult to rank for than a term with fifty thousand competing sites where the top ten are pretty poorly optimized.
To determine the level of optimization of the top ten sites, you can quickly look at a few factors. Of course, none of them alone is going to give you the total picture, but taken together, they can provide a decent guide.
First of all, look at how much of the visible content is in bold. Remember, Google highlights the keywords in that were searched for in bold. If there is bold in the title, in the content snippet, and in the URL - that is very good optimization for that keyword. That site could be difficult to displace on that factor.
Next, take a glance at the Google Page Rank of each listing. If you are really serious, you can even look at the Page Rank of the individual page that appears in the rankings, as well as the Page Rank of the home page for the site it appears on. The higher each of these are, the more solid that makes their position in the rankings. There are plugins for Mozilla Firefox which are freely available which help you quickly and easily determine Page Rank. Two of these are SEO for Firefox and SEOQuake. My personal preference is SEO for Firefox, but SEOQuake is also quite useful.
Lastly, look at the backlinks each page has pointing to it - both to the individual page as well as to the home page of the main site. There are Mozilla Firefox plugins to help you determine this as well, but it is equally easily determined by conducting a simple custom search in Yahoo. You will want to put "link:" into the search box and then the domain name.