By Anthony Ha
General Motors (NYSE:GM) plans to stop advertising on Facebook, says The Wall Street Journal according to “people familiar with the matter.” But I spoke to a source close to Facebook (NASDAQ:FB) that characterize GM’s efforts as “taking one swing and deciding to quit.” My source says GM’s efforts weren’t social enough, focusing on building apps rather than launching social ad campaigns that spread by word-of-mouth.
So what went wrong, and does Facebook need to offer more flexibility to advertisers?
Facebook was reportedly unable to convince GM that its ads are an effective way to reach consumers. GM Marketing Chief Joel Ewanick reportedly told the Journal that the company “is definitely reassessing our advertising on Facebook, although the content is effective and important.”
The auto maker supposedly spends a total of $40 million on Facebook, including $10 million on advertising, so the GM pullout won’t have a significant effect on Facebook’s $3.7 billion in revenue. However, it’s certainly awkward to have this news break just a few days before Facebook’s IPO. (And the timing probably isn’t a coincidence.)
I’m guessing GM doesn’t see things that way, but it’s worth noting that Facebook has highlighted successful auto campaigns in the past. For example, there was a Kia (OTC:KIMTF) campaign that led to a 13-percent increase in awareness for the Kia Soul, as well as a Mazda check-in deal in the United Kingdom that led to a 34 percent increase in sales of Mazda MX-5 during one of the campaign months. Isolated anecdotes? Sure, but at least they show that Facebook isn’t totally inhospitable to car companies.
If we take my source at their word, the GM news may also point to the fact that even if Facebook can work for large advertisers, there are challenges in bringing those advertisers on-board. Facebook executives themselves have said they’re moving away from traditional advertising to a new model, with ads that are built around stories. It’s a compelling idea, but for some traditional advertisers, it may be more appealing to just show a big, glossy ad — like the one that Ford ran on Facebook’s logout page.
[Additional reporting by Josh Constine]