There is opportunity (or, at least, unmet need) at every point along the literacy acquisition path. In a straightforward sense, top of funnel for pre-literate kids would be the largest market, but also potentially the most saturated.
In my head, I'm following the scratch your own itch ethos, building a hobby project out into a production app. I think I am competing with apps like Mentava or Once, in terms of being pedagogically serious early literacy acquisition (distinct from screen babysitting with plausible deniability).
The narrowed scope is intended both to keep cost low (and respect my capacity) and to divide labor in a humane way - software mediated sequencing and bookkeeping, parent-owned lap reads and the rest.
Unclear to me how large of an audience exists though that is techno-optimistic in the specific sense that technology can, in principle, improve a process like learning to read, but techno-skeptic in the sense that the medium's natural expression is engagement maxing and agency minimizing, and needs to be treated cautiously.
How to find and communicate with these (who also have small children) is not easy. I would love it if reddit exposed ads targeting the intersection of users joined to this or that subreddit - this is mechanism that would allow the outreach I want, I think, but it doesn't exist.