How to Test If Competitors in a Niche Are Actually Making Money

When researching a new startup idea, you will frequently find three or four existing websites offering almost the exact product you envisioned.

First-time founders react in one of two extreme ways:

1. The Defeatist Reaction: “Someone already built this! The market is completely taken. I have to scrap this idea and think of something totally new.”
2. The Naive Assumption: “There are four competitors! That means this market is huge and printing money! I’ll build a slightly cleaner version and take 20% of their customers.”

Both reactions are deeply flawed.

The presence of competitor websites does not prove that a market is profitable.

The internet is littered with beautiful, ghost-town SaaS products built by enthusiastic developers who launched on Product Hunt, acquired twelve free users, and haven’t touched the code in fourteen months. The site stays live simply because a Vercel hobby plan costs $0.00 to keep running.

If you build a product to compete with a company that is quietly dying of starvation, you will simply join them in starvation.

Before you invest months building software in an existing niche, you must know how to conduct forensic competitor analysis to determine whether those competitors are actually collecting real, profitable revenue.

Here is the four-step diagnostic toolkit I use to verify competitor cash flow.

1. Inspect the Changelog Cadence and Documentation Commits

A profitable software company ships code constantly. Customers demand fixes, integrations require API updates, and edge cases require patching.

A dead or abandoned project freezes in time.

Where to Look:

• The Public Changelog: Look for a /changelog, /updates, or “What’s New” link.
  • Profitable Signal: Clean releases shipped every two to four weeks with detailed, unglamorous bug fixes (e.g., “Fixed CSV export encoding issue for European currency symbols”).
  • Zombie Signal: The last update was an enthusiastic announcement from November 2023 that says: “Major 2.0 release coming soon!”
• Documentation Timestamps: Check their help center articles or API docs. Are copyright dates updated? Are screenshot interfaces from macOS Monterey? If the documentation hasn’t been updated in twelve months, the founder has likely mentally checked out.

2. Check Paid Search and Meta Ad Transparency

Nobody spends real cash on paid advertising every month to promote a product that generates $0 in revenue.

Checking paid advertising activity is the single most reliable proxy for commercial health.

The Verification Steps:

1. Google Ads Transparency Center: Visit adstransparency.google.com and search for the competitor’s domain name.
   • Are they actively bidding on commercial search keywords?
   • How long have their ads been running? If an ad has been running continuously for 90+ consecutive days, it is mathematically profitable. No bootstrapped founder runs unprofitable Google Search ads for three straight months.
2. Meta Ad Library: Visit facebook.com/ads/library and search for their Facebook/Instagram business page. Active, long-running ads indicate predictable customer acquisition economics.

3. Analyze Job Listings and Contractor Footprints

When a solo software tool crosses $10,000 to $20,000 MRR, the founder’s bottleneck shifts from code development to customer support and content production.

Profitable bootstrappers leave unmistakable hiring footprints across the web:

• Look at their LinkedIn company page under the Jobs tab or their website footer for a /careers page.
• Even if they aren’t hiring full-time, search Upwork or specialized job boards for recent client postings mentioning their product name:
  • “Need an expert to write 4 technical SEO articles a month for [Product Name].”
  • “Looking for a customer support specialist for our Shopify app (15 hrs/week).”

When a founder is spending $1,500 a month on freelance support or technical writers, their recurring cash flow easily exceeds $8,000 to $15,000 MRR.

4. Reverse-Engineer Stripe Verification and Marketplace Rankings

If the competitor operates inside a platform ecosystem (Shopify App Store, WordPress Plugin Repository, Chrome Web Store, or Slack App Directory):

• Review Velocity: Look at the date stamps on their last 20 reviews.
  • A healthy SaaS receives a steady trickle of 2 to 5 new verified reviews every month.
  • If a plugin has 400 total reviews, but 390 of them were submitted in 2021 and only one has been submitted in the last six months, usage has collapsed.
• Active Install Counts: The Chrome Web Store and WordPress.org display publicly updated active install metrics. Monitor whether that number is growing month-over-month or steadily decaying.

The Ideal Scenario: One Profitable, Lazy Incumbent

The dream scenario for a solo bootstrapper is not finding an empty niche with zero competitors.

The dream scenario is finding a niche with one or two competitors who are clearly making money, but have grown lazy, slow, and complacent:

• They charge $99/mo for clunky software built in 2018.
• Their UI looks dated and confusing.
• Their changelog hasn’t introduced a modern feature in two years.
• But their Google Ads are running continuously, proving that buyers exist and spend money every day.

That proves the market is real, solvent, and desperate for a modern, responsive alternative. Build that alternative, execute cleanly, and capture the market share they took for granted.

Related Operational Guides

For deeper frameworks and complementary operational workflows, see:

• Reverse-engineering competitor churn to spot product gaps
• Testing buyer purchase intent with landing page smoke tests
• Evaluating bottom-up market size for solo micro-tools