As has been stated here and on other PPC forums, specificity is paramount to achieving success. My question to you pros is have you experienced an increase in conversions when you targeted micro niches? My guess is yes. I.E. if you target get motgage loans for disabled veteran midgets, you would experience a higher than normal conversion rate as well as CTR from the vertically challenged ad itself.
You just have to make sure that it is not too niche, for example the keywords is so obscure that you wont recieve and impressions.
kindof, I was referring to more of the Extremely small niches, and how cconversions would be better even though they lacked the substantial volume of larger niches.
vertically challenged is the politically correct way I was once told to talk about midgets/dwarfs. But does that mean fat people are horizontally unchallenged? I agree with the comments. Even in niche areas avoid having too unique/obscure keywords which are bound to generate very few impressions.