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General Motors has dropped Facebook from its digital advertising budget, saying that it does not believe buying ads on the social network is effective in converting users to customers. This couldn't have come at a worse time for Facebook, which is preparing for its much-ballyhooed public stock offering on May 18.
As first reported by The Wall Street Journal, GM says it will continue to promote its products via free Facebook pages. According to WSJ, GM allots about $40 million to content created for and promoted across the site, $10 million of which has been, until now, devoted to paid advertisements. The other $30 million includes paying agencies to manage GM’s pages.
GM’s decision to stop buying ads on Facebook goes to the heart of questions about the value of the social network as an ad platform, and will force Facebook's communications team to work harder at proving that value to potential investors—and to brands that are considering buying ads on Facebook. GM is the third largest advertiser in the U.S.—it spent $1.1 billion on U.S. ads in 2011, according to Kantar Media, per Reuters. GM’s decision may have a long-term effect on how investors view the viability of Facebook’s ad platform in driving revenue, something that Facebook has been heavily touting ever since it held a high-profile conference for marketers in February 2012.
For what it’s worth, other automakers cited by WSJ say they are confident in Facebook’s ad platform. And GM still sees value in Facebook's reach and potential to drive consumer engagement with brands.
Follow Sahil Patel: @sizpatel
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