The second part is what I really had in mind there. One of the sites I was thinking of is a textbook example, a start-up for people who have a certain hobby.
The SEO strategy is reasonably effective: the site consistently ranks on the first page of Google for almost all targeted search terms, which is not a bad achievement starting from a page rank of nothing a few months earlier. But it's partly able to do that because no-one in the field has really done anything similar before, so almost no-one actually searches for anything like it either.
In contrast, more specialised and proactive channels, such as advertising in traditional off-line media or targeting ads at people with that particular interest on social networks, attract very favourable comments and numerically they tend to get far better click-through rates, similar levels of engagement, and in some cases a much higher overall conversion rate/lower CAC.
If you only looked at the hits from Google, your first reaction might quite reasonably be that there was no market for this product, but the feedback once people in the target market actually see it paints a different picture.