How much advertising do you do? I notice you're buying ads on search for key terms. Do you do much display advertising. I'm sure you've figured out the lifetime value of your customers and you buy advertising based on that. If your margin's decent, you can probably get more aggressive with display ads to scale the business. I think the business has a ton of potential.
I've bought ads, but it would have been better not to. Total I've probably spent around $3000 over ~2 years for campaigns that only brought in around 30 conversions. It would have been better to just spend that time blogging instead. I tried Facebook (side banner, newsfeed and promoted posts), AdWords, web comics, stumbleupon, Reddit ads. Some of the campaigns were close to break-even, though.
With this few conversions, it's hard to make any judgement to what works and small tweaks in particular are basically impossible. Noise drowns everything. It's inviting to start getting fancy with A/B testing age ranges or gender targeting on FB ads, but unless I am mistaken about 230 conversions are needed to say A/B test male vs. female assuming it would give a 30% boost. If you know how to figure out the optimal targeting without spending ~$20000 on each test, let me know :-)
If I could get LTV up (reducing churn might be the lowest hanging fruit now), conversions up or write better ads, paid advertising could still be doable in the future.
What about direct media buying? With a product as niche as yours, it may be worthwhile to identify specific sites (ie candy enthusiast forums/blogs) and work out a deal for a monthly banner ad. Start negotiating with an estimated price based on their traffic numbers and your LTV, and if after a month you're not profitable, go back and negotiate a more favorable price.
But aside from that, I don't think you should necessarily give up on advertising on the larger platforms you've been working with. As someone with extensive experience in online advertising, I will tell you that campaigns that are break even from the start or even lose a little money often have huge potential for becoming profitable. Just getting conversions is a positive sign. Consider the full path from advertisement to checkout. There's almost infinite room for improvement from the copy on your advertisements, to the images, to layout of your landing page, placement of buttons, size of form fields, background colors, etc etc. Then there's all the backend changes such as lifetime value and product costs that you can create additional margin. Combine all these things and you can swing a losing campaign to a hugely profitable one. Then with additional margin you create, you have the potential to focus on scaling. G'luck to you.
