Report: GM to stop advertising on Facebook

Three days before the big IPO, this can't be great news - and yet, it's not that surprising. From the start, institutional investors have been hesitant about the offering because ad revenue, while substantial, does not match the company's likely valuation. From the WSJ:

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 [GM marketing chief Joel 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. GM spends about $40 million on its Facebook presence. About $10 million of that is paid to Facebook for advertising, the rest covers content created for the site, agencies that manage the content and daily maintenance of GM's pages, people familiar with the figures said.

Ewanick told the Journal that Facebook content is "effective and important," but content normally refers to the unpaid pages companies use to promote their products. That's quite different from shelling out real dollars for real ads. The GM news, which hasn't been announced, comes on the heels of an AP-CNBC poll that finds 57 percent of Facebook users say they never click on ads - and another 25 percent say they rarely do.

Here's Henry Blodget's take:

Facebook is growing significantly more slowly than Google was at this stage of its development. And advertising on Facebook, however well-targeted, is like advertising on walls at a party (people are there to socialize, not buy stuff). Advertising on Google, meanwhile, is advertising to people who have explicitly expressed interest in your product.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
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