To build your website business you need visitors, not just any old visitor, but a visitor who is interested in your product and able to buy.  That's why it is so important to target your desired visitor and having a niche is the easiest way to do this.

For example, a person who has a guinea pig as a pet would not necessarily be interested in a website for toy poodles. So a website for guinea pig owners would be a way of reaching those people.  You could offer cages, toys for guinea pigs, books on training your guinea pig, food for guinea pigs.  Well, you see the idea?

When you build a niche you are offering to a certain group of people a product or service that either interests them or solves a problem for them. With a focused target it is easier to use cost effective advertising.  

Let's use the guinea pig example again. You're ready to start advertising. So you start writing ads. Your ability to attract a qualified visitor is dependent on your ad. If you write an ad that states, "All Pet Books Offered Here. Free shipping".  You might get some visitors. But targeting guinea pig owners gives you a better chance of attracting someone who is actually looking to buy.  Someone who already has a guinea pig and is looking online.

Niche building makes you an expert in your area. Building traffic through pay per click, articles, ezines, and targeted email can make you and your website a recognized expert.  This strategy can put money in your pocket.