I have an idea for two different niche sites, one market is VERY unsaturated but generates around 300k global visitors a month according to adwords, the other is a bit saturated but generates much more keyword hits. Should I put all my focus into the less saturated site, or work on both?
I would go for the market which was very unsaturated and dominate that market if you can, because it will undoubtedly provide you with boatloads of experience which will help you to try and break into the market which is quite heavily saturated. 300k hits a month is not bad going anyway, 10k visitors a day? thats incredibly good and would earn you a very nice slice of pie
If you have time do both! Even if you focus more on one site, at least when you get the time to work heavily on both, you will have some domain life. Also - and excuse me if I'm preaching to the choir - but be careful when estimating traffic through adwords. Make sure you are using exact match (not broad match) otherwise the results are alot different! Broad match uses synonyms, alternate phrases and basically is a waste of time for keyword research. Also, just because a term gets searched 300k times a month, that doesn't mean everyone will go to your site. If you are in the top 3 you may be able to get around 30-50% (if you are lucky), but any lower than that and you will get exponentially less.
The next copetition on google, the number 2 ranking, isn't even related to my keyword, which seems odd, but bascilly there is only 1 site to compete with.
In the long run, the more competitive niche likely has more possibilities for profit. So, it really depends on your timeframe for ROI.
My goal is to either rank #2 in 6 months our outrank them in a year, like I said their site is poorly designed, functions poorely, and is very unorganized.
I would go for the unsaturated first. It will be much easier, when it is no longer expandable, you will have more money to invest in the other.
If you are working fulltime, then 2 sites should be achievable. It would also provide an element of spreading risk.