But in the following days, Ed Han, the chief executive, and his team made a risky bet in search of higher profits. Hoping that traffic and sales would stay up, they pulled back on the Google search ads that had helped drive visitors to Tiny Prints.
The gamble backfired. Just as Tiny Prints pulled back, competitors appeared to spend more aggressively to display their ads when people typed “holiday cards” or “photo cards” into Google . By the middle of the week, sales growth began to taper off and a bright holiday season suddenly appeared a bit less rosy.
“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.
For most people, Google and other search engines are essential tools to navigate the Web. But the workings of the text ads, the blurbs that peddle goods and services on the search results pages, are largely hidden from Web users.
For more than one million businesses, Google’s search advertising system is like a hose inundating Web sites with traffic. Managing it effectively, though, is as much art as it is science. It requires a mix of analytics and gamesmanship, a combination of skills that has become vitally important in the Internet age.
“It is critical,” said Ellen Siminoff, the chairwoman of Efficient Frontier, which helps companies manage their search advertising campaigns. “You have to have data and be able to analyze it. It’s a bit like playing chess, but you are blind to what your competitors will do.”
Many industry insiders say search engine marketing, as the practice is known, is one of the most effective forms of advertising ever devised. In just a decade, it has grown into an $11 billion business in the United States. It accounts for the vast majority of Google’s $22 billion in annual global sales.
Google’s service, called AdWords, dominates so thoroughly that some advertisers have felt at the mercy of the company, and complained that they had little control over the complex advertising system. One company, TradeComet, filed an antitrust lawsuit accusing Google of artificially increasing its advertising rates.
But by and large, businesses find search advertising effective and continue to flock to it, albeit at a slower rate than in previous years. As growth has tapered off over the last year, Google has stepped up its outreach efforts to help midsize companies like Tiny Prints use its tools more effectively, hoping that will encourage those companies to spend more.
“It’s good for our business and it’s good for their business,” said Claire Johnson, vice president for online sales and operations at Google.
Like many other businesses, Tiny Prints also buys search ads on Yahoo and Microsoft’s search engine, Bing. While results are “very attractive,” the traffic coming from those sites is small compared to referrals from Google, Mr. Han said. As a result, Tiny Prints spends nearly 90 percent of its search marketing budget on Google, he said.
Mr. Han said that Tiny Prints, which specializes in high-end custom-designed greeting cards, had been working at perfecting its search advertising for the last two years. Its three-person team, veterans of Walmart.com and eBay, has become expert at poring over spreadsheets and sifting through the data about visitors and shoppers on the company’s Web site. During the holiday season, they monitor ads and traffic patterns hourly, and meet daily with Mr. Han and other executives to adjust budgets and strategies.
During one of the company’s daily budget meetings in mid-November, Anna Fieler, the vice president for marketing, said, “We are on a trajectory to overspend on search.” She then added, “But we are delivering on revenue.”
Search ads are bought from Google through an auction, and businesses pay Google only when someone clicks on their ad. An ad’s position on Google’s search results pages depends on Google’s secret formula derived from bid prices, the rate at which users previously clicked on the ad and a “quality score” determined by Google.