In a shock move ahead of Facebook’s IPO this week, General Motors is reportedly pulling all of its $10m- worth of ads from the social network saying that paid ads are ‘ineffective’ on the platform.
The report, from The Wall Street Journal, cites people familiar with the matter Facebook, saying the car giant still intends to do marketing through Facebook but that’s not going to put any money in Facebook’s pocketbook.
The newspaper reported that GM, the world’s second biggest automaker behind Ford, started having doubts earlier this year and met with Facebook managers, leaving the meetings “unconvinced advertising on the web site made sense.”
GM reportedly spends about $10 million advertising on Facebook and another $30 million on its Facebook promotional content and managing its Facebook pages. Facebook made $3.7bn in revenue for 2011. This $30 budget covers the creation of content and the advertising and media agencies involved, the newspaper said.
GM, which ranks behind Procter & Gamble and AT&T in advertising spending, spent $1.1 billion on U.S. ads last year. It spent about $271 million on online display and search ads excluding Facebook advertising.
Forrester Research in a blog post Monday repeated by the Journal said, “Companies in industries from consumer electronics to financial services tell us they’re no longer sure Facebook is the best place to dedicate their social marketing budget – a shocking fact given the site’s dominance among users.”
But GM’s pullout points to Facebook’s biggest challenge: Though most consumer brands see the social network as a way to connect with consumers, opinions are mixed on the value of advertising there. Posting messages is free, but Facebook astonished the market in February when it revealed that only 16 percent of “fans” see any given piece of content. To reach more “fans” as well as their friends, marketers were urged to buy advertising.
GM is only the latest company to question whether Facebook, despite its 900 million users, is an effective use of advertising dollars.
Earlier this month, an executive at Kia Motors expressed similar reservations about Facebook, the Journal reported.
Rival Ford to increase Facebook ad spend
However, speaking to Advertising Age, Scott Monty, Ford’s head of social media, said that the automaker is bullish about Facebook ads, particularly “sponsored stories” that contain a social layer, and intends to “accelerate” spending on them.
“We’ve found that Facebook ads are very effective, and they’re most effective when we strategically combine them with great content and innovative forms of storytelling rather than a straight media buy,” Monty said.
He declined to give the percentage of Ford’s overall Facebook budget allocated to ads. He did say, however, that 20 percent to 25 percent of Ford’s overall marketing budget goes to digital and social media.
