General Motors will cease running paid ads on Facebook, according to The Wall Street Journal. GM execs had determined its advertising on the social media site is ineffective. GM will continue using the part of Facebook that allows companies to distribute content for free, the newspaper reported.
“This happens as a regular course of business, and it’s not unusual for us to move our spending around various media outlets — especially with the growth of multiple social and digital media outlets,” GM said in a statement. “In terms of Facebook specifically, we are reassessing our advertising, but 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.”
The move by GM comes may affect Facebook’s expected IPO on Friday that could value the company at more than $100 billion. Facebook officially boosted the price range for its offered shares to between $34 and $38 per share, a nearly 15% hike from the previous range.
Most of the Facebook’s revenue comes from ads. Although GM spends only some $10 million in ads on the social network, a fraction of Facebook’s $3.7 billion in revenue, losing a high-profile customer like GM could raise fears about other advertisers abandoning the service.
GM spends about $40 million on its Facebook presence, but only about $10 million of that is paid to Facebook for advertising, according to the Wall Street Journal. The remaining budget covers the creation of content and the advertising and media agencies involved, the newspaper said.
Meanwhile, Ford said it was committed to advertising on Facebook and is boosting its spend on Facebook, including ad buys.
“You just can’t buy your way into Facebook,” said Ford spokesman Scott Monty told Reuters. “You need to have a credible presence and be doing innovative things.”
More than 20% of Ford’s marketing budget is spent on digital and social media, he said. The company launched its 2011 Explorer SUV on Facebook and other digital outlets for a fraction of the cost of a Super Bowl TV spot.
Automakers are increasingly turning to social media sites to reach younger consumers on their turf for less than a tenth of the cost of a traditional marketing campaign.
Ford first used social media on a wide scale to promote the Fiesta small car in 2009 in a campaign dubbed the “Fiesta Movement.” It spent $5 million on the campaign.
RBR-TVBR observation: It could be a couple of factors for GM. It’s possible the Facebook demos which skew younger are more inclined to be interested in Ford’s vehicles. Ford’s Sync system—found in almost all of them–is definitely targeted to more tech-savvy car drivers. Another factor is, yes, for a Facebook campaign to resonate into purchases, it’s not about display ads—it’s about getting FB users to participate in the brand. It has to get their attention and FB users have to virally share the campaign’s elements. It could simply be that was not yet fully accomplished, so the spend was wasted.