GM Axes $10M in "Ineffective" Facebook Advertisements
May 16, 2012 1:42 PM
The automaker said its Facebook ads have proved to be ineffective
General Motors Co. (GM) pulled its paid advertising from Facebook only days before the
social network's massive initial public offering (IPO)
GM reportedly spends about $4 billion annually on advertising worldwide. Of this $4 billion, approximately $10 million is spent on Facebook advertisements, and another $30 million on Facebook fan pages.
While Facebook ads take up a fairly small amount of GM's total amount spent on advertisements annually, the automaker says the advertising on the social network has proved to be ineffective. GM has decided to axe its $10 million spent on Facebook ads, but will keep its Facebook fan pages.
"We regularly review our overall media spend and make adjustments as needed," said Greg Martin, a GM spokesman. "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.
"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."
Experts say that GM could be having troubles gaining business from its Facebook ads because its customers are older and do not have as much of a presence on the social network.
Many wondered if GM's decision, which came only three days before
Facebook's $104 billion IPO
, would affect investor's view of the social network at a crucial time. Facebook is expected to price its shares on Thursday and begin trading under the ticker "FB" on Friday.
While other automakers may see benefits to advertising with Facebook,
The Wall Street Journal
recently reported that Google ads are more effective than Facebook ads. Facebook's clickthrough rate was 0.051 percent in 2010 while Google's was 0.4 percent. Clickthrough rates are the number of times users click on ads.
This sort of information could really put a damper on Facebook's upcoming IPO this week. Other potential impediments on Facebook’s plate include the U.S. Federal Trade Commission's (FTC)
probe into the social networks $1 billion Instagram acquisition
, which aims to increase Facebook's mobile usage, since the company's amended S-1 filing with the Securities and Exchange Commission on Wednesday mentioned that Facebook revenue will decline as more user's access the site from mobile devices instead of PCs.
The Detroit News
The Wall Street Journal
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