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Facebook Advertising Slammed on Eve of IPO

WebProNews talks to a couple of marketing experts to suss out some meaning of General Motor’s unfriending Facebook.

This week could have been a better one for Facebook. An ominous constellation of events aligned that conjured up a palpable cloud of doubt over Facebook’s ability to lure and sustain advertisers. First, WordStream released the results of a study that shows Google leads Facebook in a number of advertising-related areas like ad targeting options and ad formats. Then, the week was capped off with an announcement from General Motors that it would be pulling all $10 million from its paid advertising campaign on Facebook because, in short, GM says they don’t work.

Not the best sentiments to have attached to your company if you’re Facebook considering the company is likely to make its initial public offering this coming Friday. Facebook wants people to spend and invest money with the site, not withdraw it. So were the last few days a dreary period of runic divination for Facebook or just unfortunate happenstance? The short-term ramifications will largely be nonexistent but such developments do cast a thin pall on what should be Facebook’s most glorious achievement yet: having the most lucrative IPO in the history of tech businesses.

Going Places

GM’s announcement to stop paying for ads is likely a lot of sound and fury signifying very little. What’s of greater import is which party, GM or Facebook, let the other down. As far as GM goes, there’s been some talk that it was handling its social media campaign poorly or simply had misguided expectations from advertising on Facebook. One of GM’s chief competitors didn’t shy away from highlighting this possibility.

Zuh-zing.

GM insists that its decision to stop with the paid Facebook ads was purely coincidental that it happened so soon before Facebook’s IPO and the Wall Street Journal, who broke the story yesterday, reports that GM had always intended to reassess how it’s spending money on the site. Regardless, whether you call it fate or call it intentional, it’s hard to dismiss this peculiar sequence of events.

“A lot of people are probably suspicious of the timing of that announcement,” said Andrew Frank, a marketing analyst with Gartner, who spoke to WebProNews about GM’s decision.

Although the timing may be curious, Frank doesn’t think GM’s withdrawal of advertising funds is a hostile decision nor should it be seen as a total freeze on Facebook’s potential to appeal to large companies. “Facebook very frequently updates its formats and releases new products, so it will have another chance to pitch to GM,” he said.

GM’s cessation of paid ads on the site isn’t such a dark omen for Facebook’s future relationship with other high-profile advertisers, either, he adds. “It won’t have too much of an effect. $10 million is pretty small to the overall scheme of Facebook revenue.” He added, “It’s clearly a negative, but I think that advertisers will probably look beyond that one data point.”

Still, others think there might be cause for some apprehension on the advertisers’ side of the street. Larry Kim, the CTO of WordStream, the company that produced the report yesterday that showed Facebook lagging behind Google, told WebProNews that he isn’t surprised GM dropped its paid ads on Facebook.

“It’s not a great way of selling cars,” Kim said, “but if it truly isn’t a great way to sell cars, is there a risk that other brands need to figure out as well? Absolutely.”

The potential certainly exists for Facebook to become a great place to sell cars, however, that would take a lot of big directional changes on the company’s part. Just don’t hold your breath on that happening anytime soon.

Backseat Drivers

Mark Zuckerberg (now) famously wrote to shareholders in Facebook’s official S-1 filing, “We don’t build services to make money; we make money to build better services.” A recent profile in New York portrays a Zuckerberg who was disdainful of advertising on Facebook in the early days, not wanting it to become the “ad-choked cesspool” that MySpace eventually melted into.

It would appear that Zuckerberg’s disposition toward advertising has survived to this day and, riding into the company’s IPO lucre, he is content to relegate advertisers to the backseat. He claims that he’s sticking to the mission to make the internet more social, not more fertile for advertisers.

Whether you’re a frustrated advertiser or just a studied speculator on the side, that may not exactly come as news to you. “Based on the very slow pace of ad innovation in the last six years, it’s clearly not Facebook’s top priority,” Kim said. “They’ve made significant advances with social networks, such as with Timeline, but not nearly anything of that scale on the advertising side. It’s ten year’s behind.”

Facebook’s lack of prioritizing is what informs Kim’s lack of surprise that GM won’t pay for more ads on Facebook. “There’s no shortage of places that companies like GM can spend on advertising,” he said. “Why spend money on a website that’s not even doing their best to make the most out of advertising?”

About the Author:
Drew Bowling is a staff writer for WebProNews. He never met an all-you-can-eat buffet he didn’t like.

Twitter: @bentfortherent | Google: +Drew Bowling

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