This week General Motors announced plans to cease much of its paid advertising on Facebook but retain its various brand pages to “keep the dialogue going” and continue promoting its automotive products on the popular social networking site.
A GM spokesperson said, “paid ads on the site have [had] little impact on consumers’ car purchases”, suggesting GM’s social strategy on Facebook has failed to meet investor expectations.
This is an interesting revelation amidst the IPO frenzy this week, considering GM is one of the top U.S. advertisers in terms of ad spending, dolling out a mammoth $30 to $40 million alone to nurture its Facebook presence.
Regardless of whether GM is doing it wrong or not, or merely broadcasting instead of listening, one critical question being raised of late centers around the long-term viability of Facebook’s business model, which relies almost exclusively on paid advertising revenues.
The challenge for Facebook, particularly in the growing mobile space where people are typically less than receptive to ADs thwarting their small-ish screens, is in monetizing the more than 900 million users without significantly undermining the user experience to the point people feel compelled to leave.
Myspace quickly comes to mind as the poster child in this regard, illustrating the historically fickle nature of Web audiences and the staggering speed with which tech fortunes can rise and fall on the Net. Though Myspace never had 13% of the world’s population perusing their social network, so things could be very different this time around for Mark Zuckerberg and his talented team of 6 billionaires and 1000 millionaires.
But the question stands: Do Facebook Ads really work? And do ‘Likes’ and ‘Fans’ ultimately translate into product sales? Well perhaps not directly into car sales, but how about something a little smaller, like slices of pizza.
The story of Pizza Delicious out of New Orleans appearing on NPR this week is an interesting one because it paints a cautionary portrait of the challenges in running a successful Facebook advertising campaign. But don’t expect a mass exodus of advertisers just yet, Facebook is only 8-years old! Let’s give the platform time to mature.