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A couple of weeks ago, news broke that one of the world's largest brand advertisers, GM, was ditching its paid ad campaigns on Facebook.

The timing was curious, and some suggested it was intentional. After all, Facebook was on the verge of going public in the richest tech IPO ever. So the embarrassing news that GM was pulling its account sure looked like a well-placed blow to the world's largest social network.

According to a report by AdAge, the timing apparently wasn't coincidental after all: GM and Facebook had a falling out.

AdAge's Cotton Delo writes:

In a now-notorious meeting between General Motors Global CMO Joel Ewanick and other top marketing brass and Facebook sales executives, the automaker's team asked whether it was possible to run bigger, higher-impact ad units than the current offering, according to people familiar with the discussion. Advertising on Facebook has always been subtle. But GM wanted to do something bigger. To GM, Facebook's audience was interesting; its ad formats were not.

Rather than run sponsored stories, which look like Facebook posts, or smaller units on the right side of the pages, GM asked if it could take over a page. It was told no.

Most observers are painting the apparent clash between GM and Facebook as a battle between advertiser needs and user needs. And to be sure, there's a legitimate discussion to be had about this. But this discussion is also a red herring.

Facebook VP Carolyn Everson basically says that marketers who don't get it "will refer back to the formats that they've been used to over the last couple decades" instead of embracing Facebook's social ads. But good luck finding a Facebook executive who will talk about the obvious motivation behind GM's request: the efficacy of the ads Facebook is selling is in question.

At the end of the day, GM obviously didn't believe it was seeing a return on investment on its Facebook ad spend. Period. If its Facebook ads were working, it probably wouldn't have asked for more intrusive kinds of ad units and it almost certainly wouldn't have pulled its account entirely.

Which brings us to the billion dollar question: is there a way to deliver a satisfactory ROI through social without resorting to the type of intrusive, annoying ads that have historically been so problematic?

In the case of Facebook, the onus is really on the world's largest social network to answer that question. After all, it is the pioneering upstart that built a website used by more than 900m people, and it ostensibly knows far more about them and how they interact with its services than any advertiser ever will. If Facebook can't figure out how to develop an effective ad offering for the social channel, why would anybody expect one of its customers to?

Right now, Facebook is caught between a rock and a hard place. The generally poor reputation its ad offerings have isn't the result of lack of effort. The company has been trying for years to develop new advertising models that work in a social environment. Some have flopped; none have become the AdWords of social. Right now, Facebook is really little more than a display ad company. The problem: it refuses to recognize that.

Facebook, of course, could quickly turn its fortunes around by discovering the holy grail of social advertising. But if you look at the rapid decline of Facebook's share price, it would appear the company doesn't currently have many friends who believe it's likely to do that. The growing chorus of skeptics may prove to be right, but Facebook, flush with cash from its IPO and home to many talented people, is hardly as hopeless a company as some are making it out to be.

This said, GM's departure, and the way it apparently went down, signals trouble. Yes, GM was only spending $10m/year with Facebook -- a small fraction of Facebook's more than $4bn in revenue. But last year GM spent more on ad buys globally than Facebook generated in revenue from ads, making it the kind of whale that any media company would want to keep on its side. After all, if Facebook is ever going to grow its revenues exponentially, you can probably write on a single piece of paper the brand advertisers that it absolutely needs to count as customers. GM is certainly one of them.

For whatever reason, Facebook wasn't able to retain GM as a customer, and it doesn't appear the relationship ended on the best of terms. Which highlights an important lesson for Facebook and companies in the social space: the customer is always right. And when the customer isn't right, you had better have something to sell that makes the customer forget that. For Facebook, that's an effective social ad offering and nothing less.

Patricio Robles

Published 30 May, 2012 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2380 more posts from this author

Comments (9)

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Jenni

I'm still at a loss to understand why Facebook is so keen to push ineffective, old school advertising.

A strong built-in ecommerce platform (eBay-style for individuals and shop-style for businesses) has a lot more potential. They already have an insane number of people trying to sell via groups anyway; why not take advantage of it and charge a small fee per sale (undercutting eBay) for monthly/yearly subscriptions?

Why not have tiers for business accounts with personal access to a Facebook representative, early access to new functionality and bastly improved Insights?

Why not strike some actual, proper deals with gaming companies and make the games accessible via Facebook for mobile?

It just seems that until they starting thinking outside the advertising box, their revenue is going to be extremely limited. It's sad how much time and money they spend trying to push ad sales when they could be diversifying their income in so many different ways.

about 4 years ago

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Jenni

So many typos...it's been a busy day!

about 4 years ago

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Eric

I'm actually impressed that Facebook recognized that GM's idea would have irritated users.

Facebook's usually trying to define the users' needs for them ("Thou shalt share personal stuff with strangers unless thou feels like spending forever figuring out privacy settings").

That Facebook let user experience drive a decision is impressive, albeit expensive. And GM probably thought users would like pop-ups 10 years ago, too.

about 4 years ago

Hannah Rainford

Hannah Rainford, Social Media Manager at Jellyfish Online Marketing

As stated at the f8 conference last year, Facebook is about the user and it wants to remain user-focused. Facebook may be having issues with ROI but they are not willing to alienate their users, who at the end of the day, make up Facebook.

I think this was a good decision by Facebook. I know I'd be more reluctant to use any social media channel that was swamped with ads, let alone a whole page.

about 4 years ago

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Brandon

I think what is still being missed in the comments is that the real issue is that FB's advertising platform is ineffective. This article hits the nail on the head regarding FB's elephant in the room which is that it hasn't figured out to not just be another webpage on the internet. In the end, that's all Facebook remains is a webpage with users. Worse yet, no one is logging into Facebook to click on ads compared to search engines where people are looking to click on results which begged the Adwords model.

Facebook needs to stop trying to replicate the crap online display model that started in the 90's and find a way to let brands use Facebook in a way that users find relevant and not just advertising.

Trouble is, I don't think advertising is the way for Facebook. They need to look at premium accounts and giving their user something a feature desirable enough they'll pay a subscription for it.

No one wants to be advertised at, especially in something so intimate as your Facebook experience.

about 4 years ago

Lawrence Ladomery

Lawrence Ladomery, Founder at automatico

Could a Facebook Page (business ones only) be where a brand can do more?

Just by relaxing the guidelines for a Page cover and allowing a background graphic would help a great deal.

YouTube allows this for channels and the user experience is unaffected - I haven't heard of any complaints from YouTube users about branded channels.

about 4 years ago

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adrian branch

right move.. i would have told them to sod off too.

about 4 years ago

Peter Bell

Peter Bell, Managing Director at Fuse Lead Marketing

Yes I'm also amazed how they have spent so long achieving so little in coming up with better advertising choices. Lead generation sign-up adverts that recognise the logged in user preferences could easily be made relevant and timely. I heard that they ditched much of the affiliate style advertising that made them rich in the early days so I guess they're caught between a rock and hard place. Maybe they should charge users to switch off the adverts and build revenue's that way?

about 4 years ago

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IVA Advice

Will be interesting to see if they offer lead generation type adverts in the future, I can see this working well

about 4 years ago

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