A market with a successful competitor can be a good sign of consumer demand. However, a market with dozens or hundreds of failed/stagnant startups and no standout winners is a bad sign that you are working on a startup fad.
Or a good sign that everyone else is doing it wrong and there's still room for someone to do it right.
He cited the iPod. Nuff said there.
The startup fad that caught me was a phone app that helps you meet strangers near you. I thought I was being unique and clever, but then a hundred other startups came out in the space and failed spectacularly. The only one that survived was grindr.