This question has been bugging me for quite some time. How niche is niche? How do you determine which topic/market is niche? By no. of searches? By no. of search results? By KEI? By reviewing SEO quality of top search results?
I often look at what products or services my client has to offer. I review the log files for history and clues. From there I work on researching the number of searches for possible phrases to promote. I then research the corresponding competition links. I find that comparing the ratio between links required versus the number of searches can tell me a lot about "how niche" is enough. IMHO. Of course there is still more to it regarding content, what the client wants, etc.
I would say that it is a matter of common sense more than there being any specific numbers to meet. My definition of a niche is A special area of demand for a product or service, in other words, does it address the needs of a specialized group of people. The word niche also has connotations of a gap or unfilled area where you can squeeze yourself into without much in the way of competition. So a niche has two dimensions- the length being the size of the market and the width being the space between competitors. (maybe you could add the depth, which might be the size or economic potential of the market). The definition is also relative to your own current position. For example, auto manufacturers scan their market for trends and unaddressed demographics. First there were sedans, then station wagons, then compacts, followed by sub-compacts, now we have micro-compacts like the Smart and the Mini. The decision of whether to enter a particular segment or not was a result of cost-benefit analysis based on each company's resources. Sorry- I'm rambling a little here.