Finding the right keywords is probably the hardest thing about getting started in making money with niche sites. You need a keyword that people are searching for, that advertisers are willing to pay for, and that you can reasonably expect to rank in the search engines for. You might ask how it is possible to know all this ahead of time, and the answer is that you really can't. However, there are some tools out there to help you out.
The biggest of these tools is the Google AdWords keyword tool. I use this all the time for researching potential sites. I plan on covering its use more later on, but basically you enter in keywords and it will tell you how many people are searching for certain terms, and how much advertisers are willing to pay to have their ads appear in the sponsored search results.
Once I've used the Google tool to get some potential niche site ideas, I try to see which ones have reasonable competition, and this is the real key. See, it isn't really that hard to find a popular term that pays a boatload from advertising (i.e., credit cards). However, there is no way you are ever going to rank number #1 in Google for the term "credit cards." There is just too much competition.
So, instead you find terms that hit a sweet spot in terms of monthly search traffic, earning potential, and lack of competition. I like terms that get more than 6000 visits a month, have a listed cost per click in Google of over $1, and has a number #1 ranking site in Google that I think I can beat.
There is a lot more to all of this, but that will come in other posts later on. For now, understand that selecting the right keywords is essential to making a good niche site.
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