First, you need to establish the realistic size of your market.
Start by taking the Market Size figure you previously calculated (from Intended audience) and try to determine how many of them actually use smartphones. For example, Star Trek fans are likely to keep up with new technology and the percentage may be high, while accountants may have gone down the traditional business route and all use Blackberrys.
Refine your initial Market Size figure down to what you now think is a realistic number. This is called your Target Market.
Your Target Market is the absolute maximum number of sales you would make if everyone you target bought the app.
Calculate your Target Market.