General Motors Drops Facebook Advertising

Online, June 1, 2012 (Newswire.com) - General Motors decided to no longer use Facebook paid advertisements. GM's large drop occurred just days before Facebook's initial public offering, showing the first highly visible crack in Facebook's strategy.

GM's decision to drop their paid advertisements followed a meeting they had with Facebook officials a couple weeks ago at the Menlo Park, CA Facebook headquarters. During this meeting, Facebook officials failed to convince GM's top market executives of the true benefits of paid advertisements. Instead, they focused more on boasting the free pages on their social networking website.

According to ad-tracking firm Kantar Media, General Motors spent approximately $1.1 billion on U.S. advertisements last year. $271 million of this was spent on online display and search ads alone, not including Facebook advertising. This makes GM the third largest U.S. advertiser, trailing Procter and Gamble and AT&T.

GM's decision was also based around the fact that their Facebook ads were less effective than other online advertising options such as Google's AdSense. Facebook ads earn about half the clicks per page view when compared to the average website.

Larry Kim, founder and chief technology officer of Internet ad consultant Wordstream explains that the average targeted ad on the Internet is clicked by a consumer once every 1,000 times it is viewed. Facebook ads are clicked once every 2,000 times they are viewed. This is compared to Google whose viewers click advertisements four out of every 1,000 times they are viewed. GM's decision to spend online advertising in other places is not as crazy as one may think.

General Motors decision to drop advertising on Facebook is not a permanent action though. The plan on stopping paid ads for a given amount of time and seeing the results. GM still plans on maintaining their Facebook pages to market their vehicles. These pages, however, cost nothing to create and do not require fees to maintain.

This large drop by General Motors could be a sign that Facebook's IPO may not have as bright of a future as the company thinks. Online advertising is becoming a huge force for marketing in the future. Although one company decided to try other alternatives, many small companies are just now jumping on this bandwagon. Facebook is not going anywhere any time soon.

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