General Motors plans to stop advertising with Facebook

General Motors plans to stop advertising on FacebookThe WSJ is reporting that General Motors is planning to stop advertising on Facebook after deciding that paying for ads on the social network has little impact on consumers when it comes to car purchases.

That is a significant blow to Facebook as it prepares for its IPO on Friday. Yesterday Facebook increased the planned price range for its stock to $34 to $38 per share amid growing investor excitement. The new price will see it raise about $12.8bn and values Facebook as high as $104bn, but without big advertisers that figure could quickly fall.

GM marketing chief, Joel Ewanick, said the company “is definitely reassessing our advertising on Facebook” adding that “the content is effective and important.”

A GM spokesman told Media Week that “We regularly review our overall media spend…”

Content is very important if you compare GM’s Facebook ad spend to what goes on content.

Last year GM only spent about $10m advertising on Facebook – while it spent $30m on content. That spend included cash paid to multiple agencies to manage its content, which sounds like a massive content management bill.Multiple agencies managing multiple Facebook pages is becoming a rea headache for a lot of big brands that sees money frittered away.

Combined that is still only $40m spent by GM on Facebook.  That is a drop in the media ocean and almost chicken feed when GM’s $1.8bn ad budget is taken into consideration.

GM will still use Facebook, promoting its products on its various pages, it just won’t pay.

GM is not the first brand to suggest that paying for ads on Facebook is something that brands needn’t do.

Earlier this year Procter & Gamble CEO Robert McDonald talked about moderating his ad budget because Facebook could be “more efficient” than the paying for traditional media:

 “In the digital space, with things like Facebook and Google and others, we find that the return on investment of the advertising, when properly designed, when the big idea is there, can be much more efficient. One example is our Old Spice campaign, where we had 1.8 billion free impressions and there are many other examples I can cite from all over the world,” McDonald said.

If GM stops advertising tomorrow the loss to Facebook will not be huge. The $10m it spends on advertising represents a tiny share of Facebook’s total 2011 revenues of $3,154m (£2bn), but the message it sends out is what is possibly of most concern here.

What if other advertises look at their Facebook ad budgets and start to think about putting more effort into developing their pages, creating compelling content, rather than spending millions on Facebook advertising?

“GM started to re-evaluate its Facebook strategy earlier this year after its marketing team began to question the effectiveness of the ads, the people said.

“Mr. Ewanick and other GM marketing executives met with Facebook managers earlier this year to discuss their concerns. But the auto executives left unconvinced that advertising on the website made sense, according to people familiar with GM’s thinking.

“At the meeting, Facebook criticized GM’s approach of having multiple firms managing its advertising for the site, according to another person familiar with the matter. GM has been revamping its marketing, hiring a new ad firm to buy its media,” the WSJ reports.

The WSJ piece does go on to quote the US division of Kia Motors which while it also questions the value of Facebook ads, saying it was not clear how paying for ads helps sell cars, it did say it also planned on increasing its Facebook ad spend.