General Motors has pulled $10 million in ads from Facebook because they just didn't work, according to Wall Street Journal reporter Dennis K. Berman.
Berman, the Journal's Marketplace editor, wrote on Twitter:
"GM has pulled its $10 million advertising campaign from Facebook. Why? The ads didn't work."
UPDATE: GM will continue to use Facebook's free media to promote its brands, the WSJ reported. The $10 million was the entirety of GM's Facebook ad budget, the Journal noted.
GM is the first major advertiser to indicate disappointment with Facebook and reduce its spend. GM is the third-largest advertiser in the U.S., and although the cancellation isn't material to Facebook's numbers, it will be psychologically devastating to sales management there. The Journal reported:
GM, started to re-evaluate its Facebook strategy earlier this year after its marketing team began to question the effectiveness of the ads. GM marketing executives, including Mr. Ewanick, met with Facebook managers to address concerns about the site's effectiveness and left unconvinced advertising on the website made sense, according to people familiar with GM's thinking.
The Journal also noted that of the $40 million GM devotes to creating content for Facebook, only $10 million of it actually went to Facebook in the form of paid media.
The report comes awkwardly in front of Facebook IPO, expected Friday. It's part of a drumbeat of background noise to the offering, suggesting that advertising on Facebook is less effective than clients would like it to be.
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Click-through rates are much lower on Facebook than they are on the internet generally, or on Google, according to WordStream (which manages search ads on Google and thus has a conflict of interest):
- Facebook: 0.051%
- Google: 0.4%
- Average: 0.1%
The other issue is whether Facebook is right for all advertisers. Search advertising -- the kind Google provides -- tends to be more effective on customers who are actively doing pre-purchase research. Facebook, on the other hand, is more of an entertainment medium; no one is shopping for cars on Facebook -- a fact GM seems to have now learned.
GM had previously invested heavily in Facebook-oriented products and media. In 2011, it allowed customers to customize their vehicles on Facebook and share the designs with friends. GM also integrated Facebook with OnStar, alowing drivers to respond to Facebook messages with voice commands.
Facebook has also been a source of stress for GM. In November, Saab lovers virtually occupied a GM Facebook account, flooding it with messages urging the brand be preserved. The social network was also the medium through which environmental groups embarrassed the company into ending its funding of the Heartland Institute, a global warming denialist group.