On the eve of Facebook’s Initial Public Offering, advertising client General Motors has pulled its account, saying the network’s targeted ads don’t work.
As first reported in the Wall Street Journal, the company is only cutting its paid ads, and will continue to promote its brand via its official Facebook pages.
The report says GM had been spending around US$40 million on all of its Facebook marketing; US$10 million for ad spots on Facebook, and the rest for other expenses like content creation and agency fees.
The auto company says in a statement, "We regularly review our overall media spend and make adjustments as needed. This happens as a regular course of business and it’s not unusual for us to move our spending around various media outlets – especially with the growth of multiple social and digital media outlets.
"In terms of Facebook specifically, while we currently do not plan to continue with advertising, we remain committed to an aggressive brand strategy through all of our products and brands, as it continues to be a very effective tool for engaging with our customers.”
It seems GM has had concerns about the ads’ effectiveness for a while, the company’s CMO global marketing, Joel Ewanick, meeting with Facebook earlier this year to express his concerns, according to the report. This latest decision shows he was unconvinced by their arguments.
The move casts serious doubts on Facebook’s ability to grow revenue ahead of its IPO, with most of the company’s earning potential lying in advertising. Facebook already can’t afford to place more ads for fear of further alienating users - if advertisers start pulling out as well, it’s hard to see the company’s revenue going up.