Ask HN: How do you determine potential market size for a web app?

[yoseph]

More specifically, what type of information do you look for to inform your guesstimate?

I've started by looking at the analytics of our (future) competitors, specifically unique visitors. This information has varied significantly and am wondering if there are other sources that could help put my guesstimates on a more solid footing..?

Our web app will cater to individual investors, focusing on stocks. So, I've tried finding out the number of individual investors in the US, the size of investment information market, etc, without much luck. Any suggestions about what direction to take would be hugely appreciated!

I, like many before me, am looking to the HN community for help. :)

[Aaronontheweb]

Once I've determined, qualitatively, which markets might be most appropriate for my web application I try to calculate the maximum possible size using data from the U.S. Census Bureau (for US markets obviously.)

The 2007 Economic Census gives a pretty strong industry by industry breakdown and it's good for coming up with a "maximum possible market size by industry / sectory / region" estimate.

http://www.census.gov/econ/census07/

The Economic Census is astonishingly comprehensive, and it's freely available - well worth the look.

[spxdcz]

I wrote something up about this a short while ago, hopefully some of it is some use (I particularly like using the Facebook Ads data to estimate market size - it's easy, accurate and free):

http://contentini.com/web-app-strategy-why-market-research-i...

[keltex]

Yahoo finance (last year) had 20 million unique readers. That probably gives you an idea of the scale of how many people are individual investors or interested in investing.

http://gigaom.com/2009/07/16/yahoos-number-ones-so-much-more...

[brianbreslin → keltex]

I would bet a large % of those 20M are passive traders, I suspect the author of this thread is looking for active traders?

[yoseph → brianbreslin]

We're looking for investors, rather than traders. We're more focused on the long-term horizon.

The only issue I have with Yahoo Finance figure is that the greater majority of those uniques will be there for news on the financial markets, which is a service we will not provide, at least in the near term.

[zaidf]

American Association of Individual Investors has 150K members. http://www.aaii.com/aboutaaii/

Though most likely, there is a specific segment of that 150K that will really like your product. I'd try to pin down their profile. How do you do it?

Hustle to get a list of names/phone/emails of 100-200 of these individual investors. Call them and collect some demographic info about them along with some industry specific info. Schedule a demo of your tool. After you do a few dozen demos, you will pick up on the trend of the profile of your ideal client who really needs your tool.

It's the general process I'm using right now to do sales and it's working out well in the initial stages.

[yoseph → zaidf]

Great idea! We're going to do this once we have a working demo. Thanks!

[asanwal]

Here are some general ideas (applicable to any space) and then some thoughts specific to your domain/sector of investment.

General ideas to help sizing efforts in any market:

- Are there any public market comparables? If yes, their P&L and financial statements may be useful. Even if there is not a pureplay public competitor, if they have a business unit that competes with you in some sense, you might be able to download their 10k (annual report) or 10q (quarterly) and get some insights in the notes that management must provide or business unit level financials they might provide. This is available for free on sec.gov or even Yahoo finance I imagine.

- If there are public market comparables, look for equity research about them. In particular, look for reports entitled "Initiating Coverage". These reports when a bank or fin institution starts covering a company usually start with a market overview which can be pretty amazing for intel about the market. Warning: These reports are expensive so best to find a buddy on Wall Street with access to Bloomberg or Reuters who can find download them for you.

- As a proxy for interest in the space, you might want to see if VCs have recently invested in companies that are similar. Their interest is both a good validator of the market and based on their investment size, it's a proxy for how big the market opportunity might be. This doesn't get you to your specific numbers but maybe a proxy for market interest.

- Google it. Kind of lame, and I'm sure you've done it but just google "number of investors in the United States" and you may get some places to start. Sometimes even eHow or yahoo answers will be the first breadcrumb to finding something useful

Now to more specific sources for your market:

- Goto the website of FINRA which is for Financial Industry. It's mainly for brokers and wealth managers I believe, but there will probably be some line on there about how Finra was established to protect the X million US investors. There may be other regulatory bodies with data. These government sites are a treasure especially if you dig around. They'll prob give you investable assets, # of people, etc etc.

- See if you can find the going public documents of some past successes in the online investing space. I believe TheStreet.com went public. Maybe you can get their S1 filing for when they went public and you can find some stats in there. They are trying to "sell" their IPO at the time so they may provide some stats on how big the market is.

Hope that is helpful.

Have you found research reports that might be valuable but are too expensive? I'd imagine a space this big would have tons of research reports about it. Perhaps an incorrect assumption.

[yoseph → asanwal]

Thanks for the advice! I went through TheStreet.com's IPO prospectus and they pointed to the number of online brokerage accounts as proof of the growing number of individual investors. A real gem.

As a result, we're going to use the current number of U.S. online brokerage accounts as a measure of our total potential market.

The only difficulty we have now is cutting that down to our particular segment of the market. We focus on value investors. I haven't been able to find any statistics on value investors but perhaps the number of people googling various value investment related keywords could provide legitimate evidence. Any other ideas?

Thanks again!

[asanwal → yoseph]

Here's a terribly unscientific idea since you have an idea of total potential market.

Look at ratio of assets in value mutual funds to all other mutual funds. Might give a sense for size of the "value" market.

[rrhyne]

Check out google.com/sktool

This tool will tell you how many people are looking for your solution (or whoever you will steal market share from) with specific keywords.

[yoseph → rrhyne]

Definitely going to give this a try to further delve into potential market share numbers. Thanks!

[swah → rrhyne]

Only 20k/mo searches for "online trading" ?

[byoung2 → swah]

https://adwords.google.com/select/KeywordToolExternal suggests 1,500,000 global searches, 368,000 local searches per month for "online trading".

[Terry_B → swah]

I'm constantly surprised by how low the numbers are for lots of searches.

[brianbreslin → swah]

you might need to expand your keyword set here. not all average people are searching online trading, maybe "stock trading" or "stock trade" etc.