General Motors, one of the biggest advertisers in the world, says it is no longer going to pay for advertising on Facebook – as the popular social network readies its initial public offering on the stock market.
Facebook is a free service with some 800million users worldwide: it makes its money from data-related, targeted advertising. The IPO valuation puts the company somewhere around the $100bn mark – based on potential revenue streams such as paid ads.
The timing of GM decision could prove to be the first dent in Facebook’s IPO plans.
According to Reuters, the company is yet to confirm the reason behind its decision. GM was thought to spend around $40m a year on Facebook – with around $10m of that paying for advertising.
GM has been one of the biggest proponents of social media ads – even using an entirely digital strategy to launch the Chevrolet Sonic last October.
The move to withdraw from Facebook’s advertising appears to be down to a lack of return on investment.
GM is quoted by Reuters as saying it will continue to maintain its free Facebook brand and car pages, as these continue to be “a very effective tool for engaging with our customers.”
GM said: “It’s not unusual for us to move our spending around various media outlets. 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.”
Conversely, Ford Motor Co – another leading company in the world of Internet marketing, and an early embracer of social media – says it plans to boost its spending on Facebook, including paying for more adverts.
Around 20% of their marketing budget goes on social media marketing initiatives – including a huge push for the Fiesta, a car absent from the US market for almost 30 years. As a result of that campaign, costing $5m, Ford claims 60% of Americans were aware of the brand – something which may have cost $100m to achieve with traditional ads and marketing.
Whether GM’s decision does eventually impact on Facebook’s IPO, raises questions about the longevity of its financial strategy, or causes a cascade of advertising pull-outs from big brands remains to be seen.
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