General Motors quits advertising on Facebook as Zuckerburg and Co prep for this week’s IPO launch
General Motors Co has launched a potentially damning assessment of the need to advertise on Facebook, after it announced it would stop using the social networking website for advertisements.
GM decided Facebook’s ads had little impact on consumers, at least according to a source familiar with the matter, Reuters reported.
The decision will not be welcome news for Facebook’s management team, as the social networking giant prepares for an initial public offering, that could raise as much as $15bn (£9.2bn) for the company.
The IPO is due to be launched on 17 May and is already oversubscribed, according to unnamed sources quoted by Reuters last Friday. It will be listed on the Nasdaq Stock Market under the symbol FB.
In the run-up to the IPO, Facebook has been actively seeking ways to enhance its commercial opportunities. A trial in New Zealand is allowing Facebook users to catapult their posts to the top of their friends’ newsfeeds – if they are willing to pay.
It has also been rumoured that Facebook is planning to place adverts directly into users’ newsfeeds, in an effort to increase its share in the online advertising market. The social network already places ‘sponsored stories’ on the right hand column of certain screens.
GM’s decision therefore will cast doubt on whether online or social network advertising works better than more traditional forms of advertising.
“This does highlight what we are arguing is the riskiness of the overall Facebook business model,” said Brian Wieser, Internet and media analyst at Pivotal Research Group.
“It is not a sure thing. It sure looks likely that it will be one of the most important ad-supported media properties, but it’s not certain because there will be marketers who are challenged to prove the effectiveness of the marketing vehicle,” Wieser said.
It is understood that GM will keep its existing Facebook pages, but the car maker reportedly stated it is not unusual for it to move 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, as it continues to be a very effective tool for engaging with our customers,” GM said.
Whatever GM’s ultimate reason was for the move, it is clear some Facebook users remain hostile to attempts to commericalise the social networking website.
Last November, the TNS Digital Life study discovered that British people resent big brand names invading social networks such as Facebook and Twitter.
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