General Motors just made a dramatic update to its status on Facebook.
Just days before Facebook's expected initial public offering, GM is reassessing the value of buying ads on the social network site. They regularly review overall media spend and make adjustments as needed.
His comments came after The Wall Street Journal, citing people familiar with the matter, reported today that GM would quit buying paid ads on Facebook and rely on engagement with Facebook users through content on its free-to-use profile pages. The sources said GM executives found the paid ads had little impact on car buying.
In terms of Facebook specifically, GM is reassessing our advertising and remain committed to an aggressive content strategy with all of our products and brands, as it continues to be a very effective tool for engaging with our customers with the sharing of sharing images, videos and comments with users.
GM has spent about $40 million on its Facebook presence over about a year and a half, with about a fourth for paid ads and the rest to create and maintain content on free pages.
The GM talk comes at an awkward time for Facebook, as its business model investors ahead of its IPO on Friday, predicted to be the biggest Internet IPO ever.
The timing of the GM report seems like it's intentional. It reflects that GM does not know how to integrate social-media into a winning marketing play. And it shows Facebook has done a poor job of explaining how they are part of a social-media play.
GM's Facebook spending is a tiny slice of the social site's ad revenue. Facebook has said it had $1.06 billion in revenue in the first quarter, with $872 million from advertising.
Investors aren't likely to read much into GM's rethinking. Facebook is focused on making its site appealing to users and can work on its ad systems later.
However, Wedbush Securities says that GM's decision could prompt other marketers to rethink their paid ads on Facebook. GM is one of the bigger advertisers, and if in fact they did their homework, that is going to have a ripple effect.
Some large, brand-name advertisers already have made public doubts about the effectiveness of Facebook as a vehicle to sell goods. Gap, Nordstrom, Gamestop, JC Penney and Old Navy have shuttered virtual storefronts on Facebook when they didn't spur sales. Some snidely suggest the F in what some call F-commerce stands for failure.
Also, the Google Display Network is trouncing Facebook in key ad areas. Google banner ads, for example, are more than 10 times likely to be clicked on than Facebook ads, according to research from WordStream, a maker of search-engine marketing software and services.
Meanwhile. a new poll from The Associated Press and CNBC finds that 57% of Facebook users say they never click on ads or sponsored content. About another quarter say they rarely do so.
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