General Motors has announced that it would be pulling its paid advertising from Facebook, saying that it had too little impact. The announcement could not come at a worse time for the social media giant, which is expected to file its initial public offering on Friday.
The newspaper reported that GM spends $40 million annually to maintain a presence on Facebook, with a quarter of that in paid advertising.
Industry analysts have recently reported that companies are beginning to re-evaluate social media-based advertising.
“Companies in industries from consumer electronics to financial services tell us they’re no longer sure Facebook is the best place to dedicate their social marketing budget—a shocking fact given the site’s dominance among users,” wrote Melissa Parrish, a Forrester analyst, on Monday.
This week, the company raised its target price range to $34 to $38 per share. That's up from $28 to $35 per share, where it had been as of earlier this month.
Daniel Knapp, an analyst at IHS Screen Digest wrote to Ars to say: "I don't see a causal relationship between GM's decision to stop advertising and Facebook and the imminent Facebook IPO. It would be naive to panic about GM's decision to pull out of Facebook advertising. If any investor sees this as a bad omen, it means they did not do their homework."
He added: "Advertising on Facebook has long been funded by marketing budgets reserved for trying new things. But as online advertising investments in general are surging and starting to cannibalize spend on legacy media, advertisers are rightfully asking whether the money spend is justified because it has reached significant sums now. And here the irony starts: Facebook produces data on ad campaigns in a detail that advertising executives could only dream of only a decade ago. But more data does not necessarily mean better data. The advertising measurement in TV is much simpler than online on Facebook, but players have agreed what those metrics mean. Facebook has shaken up the advertising world by changing the relationship between brand and consumer fundamentally. We do not have a one-sided street anymore. But how to capitalize on this marketing revolution long-term, how to define new metrics and get industry-wide acceptance for it is another story. It is a [laborious] task. I don't say it is not possible, but there is a long road to go."