Is my procedure for determining market size based on keyword search traffic a good one?

I'm making a software for a very small and specific market. Worldwide, the numbers seem good. That is, there is a possibility for business. Nevertheless, I wanted to post my procedure. The question is simple: is this right? would you consider this valid?

I first looked for data in the US census information. There I learned that the sector I'm interested in makes X amount of money per year. But I'm not aiming to the whole sector, just a small portion of it. To calculate the portion, I went to google analytics and found the relationship R between searches looking for information related to the whole market, and searches for keywords related to my more specific market share. I then assumed that the market share for my product is X*R in the US.

Then, I would have to estimate a realistic share of that market that I can get (100% is not realistic, ever), let's call it S, so that my final magic number (in the US) is X*R*S.

I'm aware that I may be dead wrong. But is that probability high? would you count that as valid? would you bet on it?

I don't think this is a great method of measuring market size. Factors I don't see accounted for in your method:

• cost of services / products in your niche vs cost of services / products in the larger market (even if searches for your niche products are 1/10th of searches for the larger market products, they may only account for 1/100th (or who knows, 1/5th) of the amount of revenue the market is generating as a whole. It depends on everything's cost.)
• non-search sales channels for the market. Particularly within a broader market, non-search channels like display advertising, direct sales, etc. can drive larger amounts of sales.
• non-product revenue from broader market companies. Larger companies have more opportunities to generate revenue not directly related to their primary-market products. Census data isn't going to separate sources of revenue; they're just tallying total revenue from companies in the market.

That said, while I don't think niche to broad search traffic ratios are a good method for determining market size, niche market search traffic alone isn't a bad indicator of market opportunity. Think about how you could validate the opportunity through ads leading to a pre-sales page.

Also, make sure you're looking at exact-match search counts in the AdWords keyword tool, not broad-match, otherwise your estimates of how much search-traffic these keywords are getting will be vastly inflated.