Withdrawal of one of the world’s biggest advertisers days before stock market sale seen as an embarrassment by analysts
General Motors, the world’s biggest car company, has unfriended Facebook just days before the social media giant is planning a stock market sale that is expected to value the company at $100bn.
The auto giant confirmed that it will no longer pay for advertising on the social network, deciding instead to concentrate on Facebook pages, which are free.
GM is one of the world’s biggest advertisers and spent $1.83bn on US ads last year, according to Kantar Media, an ad-tracking firm. The move is a blow to Facebook, which needs to ramp up its advertising revenue to justify its value.
The story was first reported by the Wall Street Journal. GM marketing chief Joel Ewanick told the paper GM “is definitely reassessing our advertising on Facebook, although the content is effective and important”.
The company confirmed it is dropping the ads but intends to keep using Facebook to promote its brands via Facebook pages, which are free.
“We regularly review our overall media spend and make adjustments as needed,” Pat Morrissey, director GM product and brand communication said. He said it was “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, we are reassessing our advertising, but we remain committed to an aggressive content strategy through all of our products and brands, as it continues to be a very effective tool for engaging with our customers,” he said.
GM has spent only about $10m on Facebook ads, a tiny fraction of the social network’s $3.7bn in revenues. But it sends an awkward signal in a week when the company has been trying to convince investors that its advertising business underpins the massive valuation the company has received.
Sam Hamadeh, founder and chief executive of PrivCo, an analyst, said: “This is an embarassment for Facebook, no question. They are one of the biggest advertisers in the world. You never want to see something like this come out, especially now.”
He said that it was difficult to measure the impact of display advertising for cars online. The adverts are meant to promote a brand to consumers who may not buy another car for months, possibly years.
But Hamadeh’s said GM’s decision would inevitably make other advertisers look at their ad buying decisions.
The news comes as a poll conducted by the Associated Press and CNBC found nearly half of Americans believe Facebook is a passing fad.
Some 46% of respondents told the pollsters that Facebook would fade away as new platforms come along. About 43% believe the site will likely be successful for the long haul.