GM drops Facebook ads

2012-05-16 10:01

DETROIT, USA - General Motors said it will stop advertising on Facebook as it believes the social network has had little impact on customers.

The decision by GM, the third-largest advertiser in the US, marks the first crack in Facebook's strategy and underscores doubts about whether advertising on Facebook works better than traditional media.

Brian Wieser, internet and media analyst at Pivotal Research Group, said: "This does highlight what we are arguing is the riskiness of the overall Facebook business model.


"It is not a sure thing. It sure looks likely that it will be one of the most important ad-supported media properties, but it's not certain because there will be marketers who are challenged to prove the effectiveness of the marketing vehicle."

For now, these worries do not appear to be impeding strong investor demand, with Facebook increasing the size of its offering by 25% to raise about $15-billion (R124-billion).

Facebook, founded eight years ago by Mark Zuckerberg, is expected to start trading on the Nasdaq on May 18th.

GM said it will still have Facebook pages to market its vehicles and added that it is not unusual for it to move spending around various media outlets.

GM said: "In terms of Facebook specifically, while we currently do not plan to continue with advertising, we remain committed to an aggressive content strategy through all of our products and brands, as it continues to be a very effective tool for engaging with our customers."

GM spends about $40-million (R333-million) on its Facebook presence, but only about $10 million (R83-million) of that is paid to Facebook for advertising, according to the Wall Street Journal.

Ford spokesman Scott Monty said the automaker was committed to advertising on Facebook: "You just can't buy your way into Facebook. You need to have a credible presence and be doing innovative things."

Another fan of Facebook is Japanese automaker Subaru, which has invested heavily into its online presence. According to Subaru spokesman Michael McHale: "Advertising plus content equals more clicks to our website, which we like."