Those who are new to Internet business world -- heck, even those who have been successfully operating online businesses for some time -- can attest to difficulty in deciding what to sell.
"Newbies" in particular may be led to believe that more "stuff" they sell on their websites, more money they'll make. They place dozens of banners and ads on their sites for everything from dating services to internet marketing manuals, from pet toys to self-improvement tapes. It's pretty hard to persuade a visitor to purchase anything from a site like this; chances are -- if they even managed to find your site in first place! -- they'll simply go back to search engines and find a site that's offering them exactly what they want. One click-of-the-mouse and they're gone, probably for good.
You can't be everything to everyone. Choosing a tightly focused niche market gives you ability to home in on a specific group of like-minded individuals: it's easier to find out what they want, and thus easier to come up with and develop new products and services. It's also easier to make your site "stand out"! You'll have a better chance of success if you take time to define a niche.
However, strain of trying to figure out what to build a business around often leads people to do what they perceive as "easiest": copy what other people are doing.
For instance, many people decide to build websites around teaching others how to market on internet. But if you use Overture's popular Search Suggestion Tool, you'll see that "internet marketing" received 102085 searches (at time of writing), compared to:
* recipe - over 1 million searches * pet supply - 109975 * jewelry - 449044 * gardening - 787621 * golf club - 548398 * exercise - 129368
As you can see, there's a market for a wide variety of products and services. Your "job" is to figure out what people are looking for -- whether it's a new product or an "improved" version of an existing product -- and ask yourself how you can fill that need.