GM Stops Advertising on Facebook

GM wasn't a large advertiser, but others could follow it

By on May 16th, 2012 09:22 GMT

Facebook's much-anticipated IPO, which is set for this Friday, has been generating a lot of interest and a lot of speculation. The company's prospects look good, great in fact, it just increased the price range for the shares it's going to make available on the Nasdaq market.

But as with any IPO this size, there's controversy and skeptics, if only because someone has to take the unpopular stance.

GM has just announced that it will stop advertising directly on Facebook, citing poor results. This is all doubters needed to "highlight" why the Facebook IPO is going to be a flop and why Facebook as a company is troubled.

Granted, Facebook has been having trouble growing revenue at a steady pace, but it's already making several billion, mostly from advertising, each year. But its ad business is far from refined.

One of the problems is that Facebook is so large, with so many page views, it's hard to find ads to fill the inventory, at least not particularly expensive ads. Of course, there's also the old problem of users not being all that interested in ads in their social networks.

The fact that a huge number of people use the Facebook mobile sites or apps, sometime exclusively, and that Facebook only now started showing some ads on mobile devices, doesn't help.

GM, which spends billions on advertising each year was hardly a big player on Facebook, it spends some $10 million, €7.8 million a year on ad purchases on the social networks out of a total of $40 million, €31.2 million managing its Facebook presence. That's a drop in the bucket compared to Facebook's ad revenues.

But the move does create a ripple effect many other existing advertisers may look twice before deciding how much money, if any, they should spend on Facebook. But Facebook is simply too large and has too many talented people for it not to start making huge amounts of money from advertising and other revenue sources, especially when it eventually launches its third-party site ad network.

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