General Motors plans to stop advertising on Facebook because the ad campaigns are not paying off in any measurable way.
“We felt we were not getting an ROI for our advertising spend,” GM spokesperson Pat Morrissey told the E-Commerce Times.
GM’s advertising will phase out by this summer, he added.
This decision was made as part of a standard review process GM goes through with all of its advertising, Morrissey said. “We will continue to review Facebook and our decision.”
In the meantime, GM will focus on its product and brand content on the site.
At US$10 million, the company’s ad spend on Facebook is relatively small. The reaction to GM’s decision, however, has been disproportionately big. The timing of the news, of course, has much to do with the furor. Facebook is two days away from a blockbuster initial public offering whose projected $104 billion valuation is highly predicated on projected advertising revenue.
GM’s decision stirred debate because it highlights a nagging sense of uncertainty marketers have expressed about advertising on Facebook: Yes, the site has unprecedented reach and its users are staying on the site longer and longer. But are they receptive to advertising?
Does It Work?
Advocates for Facebook — indeed, Facebook itself — will trot out all sorts of studies and case examples that illustrate its users are indeed open to advertising, precisely because it is able to target users based on their interests. Also, Facebook has developed a slew of formats over the years, most notably the Sponsored Story format, designed to engage users.
These are valid points. Ford has a strong presence on Facebook, for example, and according to media accounts has no intention of scaling back.
General Motors also has a strong presence on Facebook — the site is clearly important to it as a brand mechanism. No doubt there is also something of the “keeping up with the Joneses” to its presence on Facebook. With every other automaker on the site, GM can’t afford to be absent.
GM’s verdict was over the value of Facebook’s paid advertising services.
That distinction is very positive for Facebook, Ben Levitan, CEO of IMN, told the E-Commerce Times. “My sense is GM will be back as an advertiser but it will have learned from its experiences on the site.”
The reason for GM’s unhappiness with the site is that its approach was too straightforward, Levitan said.
“They will come back emphasizing content marketing strategies as opposed to straight marketing and be better off for it,” he predicted.
Content marketing refers to the concept of developing compelling stories about the brand and the customer, according to Levitan. It is an approach Facebook urges on its marketers but one that these companies don’t always adopt.
“That is how Ford has put its mark on Facebook,” he said. “Their message is ‘we have terrific products and they also make a difference in the lives of our customers.'”
There are other factors to consider with respect to GM’s decision, Richard S. Bernstein, CEO of Richard S. Bernstein & Associates, told the E-Commerce Times.
“GM has to justify every dollar that it spends, especially after the bailout,” he noted, while Ford has more leeway with its shareholders.
“So if the management at Ford sees long-term value in advertising on Facebook beyond short-term monetary returns, then shareholders should trust that these guys know what they are doing,” said Bernstein. “After all, they’ve earned the right to be wrong at some point.”
It can’t be ignored, though, that ads posted on Google get a higher response than those of Facebook, he added.
“Odds are that someone searching for insurance in West Palm Beach on Google would be a qualified lead for my business,” he pointed out. “Someone who goes on Facebook to see what their friends did last night probably isn’t.”
Facebook did not respond to our request to comment for this story.