On the eve of Facebook's wildly anticipated initial public stock offering, General Motors said Tuesday that it is "reassessing" its spending on Facebook advertising -- about $10 million -- but "remains committed" to the social network as part of "an aggressive content strategy with all our products and brands."
In other words, GM will not pay Facebook for ads but will continue to maintain content, for which Facebook doesn't collect revenue. News of the decision was first reported in the Wall Street Journal.
GM's position is far from universal. Ford Motor said it would "accelerate" ad spending on Facebook in conjunction with the content it's producing for the network.
But GM's pullout points to Facebook's biggest challenge: Though most consumer brands see the social network as a way to connect with consumers, opinions are mixed on the value of advertising there. Posting messages is free, but Facebook astonished the market in February when it revealed that only 16% of "fans" see any given piece of content. To reach more "fans" as well as their friends, marketers were urged to buy advertising.
Automotive is a tough category for Facebook, as the purchase cycle is long and many factors influence a decision. A spokesman for the company said it would have no comment on GM's decision.
Sources told Ad Age that world's second-largest automaker has been reviewing the effectiveness of advertising vs. placing content on the site for a while. (GM named Carat as its new media spending agency in January.). GM spokesman Tom Henderson said that the carmaker would continue to budget for content spending on Facebook "because Facebook continues to be a really effective tool for engaging with our customers."
Mr. Henderson emphasized that "adjustments" were ongoing in ad spending. "This is a regular part of business, and its not unusual for us to move our spending around various media, especially considering growth of digital and social outlets."
Besides putting a damper on the Facebook IPO, scheduled for Friday, GM's move -- a company source said timing had nothing to do with the announcement -- raises the question of whether Facebook advertising is effective, especially in the automotive space.
But Scott Monty, Ford's head of social media, said that the automaker is bullish about Facebook ads -- particularly "sponsored stories" that contain a social layer -- and intends to "accelerate" spending on them.
"We've found that Facebook ads are very effective, and they're most effective when we strategically combine them with great content and innovative forms of storytelling rather than a straight media buy," said Mr. Monty. He declined to give the percentage of Ford's overall Facebook budget allocated to ads. (He did say, however, that 20% to 25% of Ford's overall marketing budget goes to digital and social media.)
According to Avi Savar, founder of Big Fuel, which was GM's social-media agency until GM ended the relationship in December, the automaker never seemed persuaded of the value of social media in general and Facebook likes in particular.
"In a sales-driven culture, it is very hard to wrap your head around putting money in places where you don't see immediate results in an uptick in sales," Mr. Savar said.
GM is taking its questions directly to users. Yesterday it posted a link to its Facebook page asking fans how they found out about it. Possible responses include an ad in Facebook, an ad outside of Facebook, "searched for GM on Facebook" and "saw it on someone else's Facebook page."
GM, the third-largest U.S. advertiser, spent $2.8 billion domestically and $3.9 billion globally in 2010, the most recent year for which data are available, according to Ad Age data.
After a creative-agency review earlier this year, GM assigned its global creative account to a new firm, Commonwealth, made up of talent from Omnicom's Goodby Silverstein & Partners and Interpublic Group of Cos.'s McCann Erickson Worldwide.
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