GM to stop buying ads on Facebook?
General Motors just made a dramatic update to its status on Facebook.
Just days before Facebook's expected initial public offering, spokesman Tom Henderson said GM is "reassessing" the value of buying ads on the social network site. He wouldn't provide details, saying "We regularly review our overall media spend and make adjustments as needed."
His comments came after The Wall Street Journal, , citing "people familiar with the matter," reported today that GM would quit buying paid ads on Facebook and rely on engagement with Facebook users through content on its free-to-use profile pages. The sources said GM executives found the paid ads had little impact on car buying.
Henderson said that, "in terms of Facebook specifically, we are reassessing our advertising and remain committed to an aggressive content strategy with all of our products and brands, as it continues to be a very effective tool for engaging with our customers" with the sharing of sharing images, videos and comments with users.
GM has spent about $40 million on its Facebook presence over about a year and a half, with about a fourth for paid ads and the rest to create and maintain content on free pages.
The GM talk comes at an awkward time for Facebook, as its business model investors ahead of its IPO on Friday, predicted to be the biggest Internet IPO ever. Facebook declined to comment.
"The timing of (the GM report) feels like it's intentional," says Steve Goldner, a senior director at digital-media agency MediaWhiz. "It reflects that GM does not know how to integrate social-media into a winning marketing play. And it shows Facebook has done a poor job of explaining how they are part of a social-media play."
GM's Facebook spending is a tiny slice of the social site's ad revenue. Facebook has said it had $1.06 billion in revenue in the first quarter, with $872 million from advertising.
Investors aren't likely to read much into GM's rethinking, says Brian Blau, an analyst at tech research firm Gartner. He says Facebook is focused on making its site appealing to users and can work on its ad systems later. "I'd be careful to not read too much into this," he says.
Additionally, large advertisers routinely shift their spending. "Big clients come and go," he says.
However, Wedbush Securities analyst Michael Pachter says that GM's decision could prompt other marketers to rethink their paid ads on Facebook. "GM (is) one of the bigger advertisers, and if in fact they did their homework, that is going to have a ripple effect,"
Some large, brand-name advertisers already have made public doubts about the effectiveness of Facebook as a vehicle to sell goods. Gap, Nordstrom, Gamestop, JC Penney and Old Navy have shuttered virtual storefronts on Facebook when they didn't spur sales. Some snidely suggest the F in what some call F-commerce stands for "failure."
Also, the Google Display Network is trouncing Facebook in key ad areas. Google banner ads, for example, are more than 10 times likely to be clicked on than Facebook ads, according to research from WordStream, a maker of search-engine marketing software and services.
Meanwhile. a new poll from The Associated Press and CNBC finds that 57% of Facebook users say they never click on ads or sponsored content. About another quarter say they rarely do so.