Facebook apparently hasn’t experienced any problems convincing investors to put their money into its IPO, but while the social network focuses its attention on Wall Street, it might do well to pay more attention to a nearby street: Madison Avenue.
That’s because, according to a Wall Street Journal report, GM, the world’s largest car maker, apparently isn’t hot on Facebook’s paid ads.
In fact, it’s so unimpressed that the Wall Street Journal’s sources say that the once-troubled automaker “plans to stop advertising on Facebook after the company’s marketing executives determined their paid ads had little impact on consumers”. Ouch.
The timing is intriguing, and many believe it isn’t coincidental. But the news isn’t all bad for the world’s largest social network: the Wall Street Journal’s sources say that GM will continue to invest in its Facebook Pages, which Facebook doesn’t charge for — yet. at least.
That investment, pegged at some $30m, is triple the amount GM is said to have been paying to Facebook directly for advertising ($10m).
While GM’s move is a blow to Facebook on the eve of its IPO, and it highlights some of the risks Facebook investors will have to grapple with as the company seeks to live up to its exorbitant $100bn-plus valuation, the real lesson here is that companies need to be vigilant about all of their digital spending, particularly as it relates to new channels like social.
In an effort to be more innovative and catch new trends early on, Madison Avenue is arguably more willing than ever to try new things and get involved with young services developing new ad models. That’s certainly a good thing. But at the same time, there’s an argument to be made that exuberance (and perhaps fear) has pushed some marketers to treat what should be experimental campaigns as standard digital media buys.
That might work if those campaigns produce an ROI, but as GM apparently discovered, the latest and greatest doesn’t always deliver. In the case of Facebook, Forrester analyst Nate Elliott writes, “Companies in industries from consumer electronics to financial services tell us they’re no longer sure Facebook is the best place to dedicate their social marketing budget—a shocking fact given the site’s dominance among users.”
In reality, the shocker isn’t that advertisers are questioning their Facebook investments despite its dominance, but rather that they haven’t questioned some of their social spend sooner. There have been plenty of reasons to be skeptical about the efficacy of many social ad offerings, and the fact that most users are ignoring often well-targeted but still-annoying social ads is not front-page news.
While GM will continue to invest in Facebook even though it won’t be paying the social network directly, it’s likely that brands will eventually start to review their ‘free’ social media efforts too given that the costs of building, growing and managing Facebook Pages, Twitter accounts, and the like isn’t cheap either, as evidenced by the fact that GM spends 8-figures doing just this.
So where does this leave Facebook and other social giants as they look to prove their worth as advertising platforms?
Obviously, it’s easy to accept that the consumer internet’s hottest services are too big to ignore, but when the ROI they deliver is too small to move the needle, throwing good money after bad doesn’t a great marketing strategy make.