Managing search ads online is a tricky business. And when it comes time for the holidays, one that can make or break quarterly earnings for etailers. In the case of greeting card maker Tiny Prints, the company decided to pull back on search ads after Thanskgiving, and lost out on business.
According to The New York Times, after brisk sales on Cyber Monday, the company hoped that customers would keep coming after it pulled back on search ads a bit. But they didn't:
“We knew we had made a bad decision,” Mr. Han said. Tiny Prints reversed course, but it took the company, which is privately held, more than a day to recover — a critical amount of time during the heavy shopping season."
The article is interesting because it highlights how difficult search advertising remains, even when deployed by individuals who know the business inside and out. Tiny Prints, for instance, is run by former eBay and Walmart.com veterans.
But in a business that depends on whatever move competitors decide to make at a given moment, search strategy ends up being a real-time business. The online greeting card business depends greatly on search to make its revenue targets and Tiny Prints monitors click through traffic hourly.
During Cyber Monday, the company received twice as many orders as it did a year ago, but they were also on track to overspend on search, meaning that they'd be overspending to get those customers to purchase.
From The Times:
"Early in the holiday season, for example, most people are window-shopping, so few clicks turn into sales. Tiny Prints is forced to pay more than $50 to acquire each customer, leaving little room for profits on an average order. Relying on spreadsheets of buying patterns from previous years, Tiny Prints search marketers make the case to Mr. Han that their cost of acquiring a customer is on track."
Later in the season, Tiny Prints can pay around $35 to win a new customer, but at the same time, competitors may be avidly buying up search terms, making it more expensive to get on Google's first page of search results.
Meanwhile, Tiny Prints spends 90% of its search budget on Google. But all was not lost for the company in the week after Thanksgiving. Tiny Prints' Google search ads drove more than 20% of revenue this season. And Ed Han, the company's CEO gives The Times a good lesson into search marketing:
“Of the eight most important days of the year, we got seven exactly right. On one of the days, by our standards, we fell on our face.”
Reader comments (5)
11:52AM on 23rd December 2009
What a hard business environment to operate in and such a high cost of customer acquisition, leaving little margin for profit and even less margin of error. Perhaps these guys should think of another way of reaching customers as the cost of PPC in that super competitive arena would only seem to be going up due to over demand on terms.
Instead of doing the same thing maybe they need to think of completely new ways of publicising their site, even merging with competitors may leave one profitable business rather than two paying over the odds to Google.
At from $35-$50 per customer that is not such a radical idea.
8:58PM on 23rd December 2009
It does seem odd that a company selling products retailing at the sub-dollar level can afford to spend $35+ to acquire a customer. I tend to support Neale's comment that perhaps another channel would be the most appropriate.
It does appear that customers using this type of service tend to be very loyal so maybe refer a friend, cashback, viral or other incentive schemes might be appropriate.
5:43AM on 24th December 2009
As far as I did research on ADWORDS, it is very difficult to make profit with adverising with them. A lot of click frauds are charged to customers randomly without any sale. And you never know what your competitor is doing. Google should innovate how to give benefits to its advertisers. Otherwise it is not very far that Google will suffer a great loss from distrust.
Any body having idea which country to target will better perform the ads?
8:08AM on 28th December 2009
obviously Adwords barely can make money except you site has a high PR, you have a high PR then you have money
2:49AM on 12th December 2010
their ads suck and are incredibly annoying--glad to see they are failing
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