GM Yanks Facebook Paid Ads, Says Ads Don’t WorkBy: Drew Bowling - May 16, 2012
Due to a lack of vim from the company’s paid ads on Facebook, General Motors is said to be planning to pull some advertising funds from the social networking site, according to the Wall Street Journal.
The timing of GM’s decision to nix its paid advertising couldn’t come at a worse time for Facebook as it aims to make history this Friday with the expected bonanza of its initial public offering. Facebook executives spent the better part of last week and this week embarked on a road show hoping to convince enough investors that the company can achieve a $100 billion valuation at this Friday’s IPO. Facebook CEO Mark Zuckerberg has already had to assuage investors’ apprehension about Facebook’s difficulty in monetizing its mobile platform so it certainly is no vote of confidence for Zuck & Friends that the country’s third largest advertiser has declared paid advertising on Facebook as a money pit.
Asked about the move, GM marketing chief Joel Ewanick said the auto maker, “is definitely reassessing our advertising on Facebook, although the content is effective and important.” Content refers to the unpaid Facebook pages many companies use to promote their products.
GM started to re-evaluate its Facebook strategy earlier this year after its marketing team began to question the effectiveness of the ads. GM marketing executives, including Mr. Ewanick, met with Facebook managers to address concerns about the site’s effectiveness and left unconvinced advertising on the website made sense, according to people familiar with GM’s thinking.
WSJ goes on to detail that GM spends a total of $40 million to maintain a presence on Facebook but only about $10 million is devoted to paid advertising on the site.
Couple GM’s decision with a report released earlier today by WordStream that analyzed the effectiveness of advertising on Google or Facebook and declared that Facebook was lagging behind in the ad game. The WordStream report comes barely a month after a different survey said that Facebook was leaving Google in the dust with regard to cost-per-clicks.
So is there any fear that investors could smell weakness in Facebook’s until-now seemingly irresistible ascent into its social days of Camelot? After the WordStream report and now the GM announcement, you have to imagine that some investors are going to at least balk at Facebook’s IPO. It likely won’t deter the company from becoming stinking rich this Friday, but it could make the difference between crossing that $100 billion valuation and hitting the ceiling in the mid-$90 billions (I know, because at that point, the difference between $90 billion and $100 billion is soooo different).
Facebook has at least been making motions that its going to tackle the mobile advertising problem in the near future. Why else would Facebook be scooping up mobile apps ahead of Friday’s IPO? The acquisitions serve as an indication to investors that the company is forming a strategy for how to address the deficiency in mobile ad revenue. That fix is at least within Facebook’s grasp. But the GM defection? There’s no app that can be purchased to remedy that problem.
Whether you’re a Wall Street jockey or just treat the stock market as a spectator sport, Facebook’s IPO in three days just got a bit more interesting. You have to imagine that Facebook’s mad men (and women) are doing some explaining right now on that road show of theirs so as to ensure that this is the last time you hear jarring reports like this:
Breaking from WSJ: GM has pulled its $10 million advertising campaign from Facebook. Why? The ads didn’t work. $GM