Has anyone had any luck targetting specific niches or communities? I was thinking about targetting specific groups so advertising would be alot easier. Does this sound like a sound decision?

of course, as long as your niche market isn't overloaded with other people doing the same thing, and your marketing/branding efforts match them. also your target audience has to be decision makers, have capital to invest in your product, and like to do business in the arena you choose (online only, face/face, etc).

niche marketing is the most effective way to bigger profits.