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GM stops advertising on Facebook days before social network's IPO

GM stops advertising on Facebook days before social network's IPO

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Just two days before Facebook's IPO, General Motors said it plans to stop using the social network's paid advertising products after their marketing department concluded they did not perform well.

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Mark Zuckerberg with Chicken
Mark Zuckerberg with Chicken

The timing for Facebook could not be worse. Blue chip advertiser General Motors plans to stop advertising on Facebook after the company's marketing team decided that the social network's ads were not wooing new customers. The story was first reported by the Wall Street Journal, which says GM will continue using Facebook's free pages to promote its products.

Facebook's IPO is set for Friday morning and is expected to do very well. But this news adds to the growing chorus who say that the social networking giant's business may have peaked. The company reported weaker-than-expected financials for the first quarter of 2012, with its advertising business slowing and its profit dropping.

The company recently threw a lavish party at the Museum of Natural History in New York to woo big advertisers like GM to its new suite of paid advertising products that integrate with the its Timeline. And while Mark Zuckerberg has so far blamed the recent financial woes on a soft ad market, Facebook's biggest competitor for online ad dollars, Google, reported strong earnings for the same period.

GM spends about $40 million a year on its Facebook marketing efforts, about $10 million of which was paid advertising.

We have reached out to Facebook for comment and will update with any response, but don't expect much, since the social network is still in the SEC enforced "quiet period" leading up to their IPO.

Update:

Sources close to the situation say that GM worked closely with its new media agency, Carat, spent heavily building apps for Facebook, but spent little on paid distribution through Facebook's newsfeed. "They didn't play Facebook's game. It was kind of, if we build it, they will come, and clearly it didn't pay off," said our source.

We attended Facebook's recent marketing event in New York, where auto makers like Ford shared success stories from their advertising efforts on the social network.

Update 2: Bloomberg spoke with GM spokesperson Pat Morissey, who said that GM is "reassessing our advertising," but that the company has "not pulled ads and no decision has been made." Unspoken, of course, was the inevitable "yet."


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