You Do The Dishes

GM, the third largest advertiser in the United States, announced today that it would pull its $10 million dollar advertising budget from Facebook. This budget goes towards paid ads shown on Facebook – the ones that you see in the sidebars. GM has said that it will still continue to spend money on its Facebook page and other social marketing efforts (approximately $30 million dollars, according to the WSJ article that broke the news).

If you take one thing from this post, it’s this:

GM’s decision doesn’t reflect on the effectiveness of social marketing.

There’s a big difference between social marketing and people clicking on display ads.

A few quick thoughts:

• Marketing, not advertising. Facebook is a social site where interaction and engagement are most important for the user. People are much more likely to click on the organic content in their News Feeds, than on what essentially amounts to display ads that have social content. Perhaps the GM news underlies the point that Facebook is an engagement platform (conversations on brand pages or between friends about content from a brand page) and not a one-way communication device (ads with some social proof). It’s difficult to get people to click on display ads. We already knew that.
• Bad for Facebook; good for agencies and brands. Advertising is easy for Facebook to monetize. Marketing is much harder. That’s bad news for Facebook’s valuation and business model, but it’s not bad news for social marketing agencies whose bread and butter is creating content that spurs a conversation and delivers a brand message. Notice that GM still said that there is value in the “content” on Facebook.
• Facebook will go on the offensive. I’d like to see a barrage of data coming from Facebook on click-through rates and the effectiveness of their ads – unlikely to happen before the IPO though. With so much of their revenue hinging on ad products, I can’t see them sitting by idly.^[1] Undoubtedly there are brands that have seen strong click-through rates with Facebook ads. The GM experience might not be universal.
• What was the objective? The WSJ article stated that “General Motors Co. plans to stop advertising on Facebook after the company’s marketing executives determined their paid ads had little impact on consumers” and “GM, started to re-evaluate its Facebook strategy earlier this year after its marketing team began to question the effectiveness of the ads.” The italicized words beg the question of what GM’s objective was with the ads? Was it to drive conversion? Referral traffic to the site? Engagement on Facebook? Addition of Facebook fans? Sharing of GM branded content? Without knowing those objectives, it’s hard to understand the full reasoning or implication of GM’s decision.
• Why do this now? Why announce this three days before the Facebook IPO? To decrease Facebook’s leverage? To drive the stock price down? Cue the conspiracy theories.
• Everything is conjecture until we get some data. That’s the only way to truly understand this story. What were the spends? What were the key indicators that determined success? Without those metrics it’s difficult to draw any real conclusion about the effectiveness of Facebook’s advertising business.

There are two ways this can go and one inevitable truth here. Either Facebook’s ad products are not great or GM’s experience with them is an outlier. Without some pretty sweeping data, we’re not going to get a real answer there. But what we do know is that, even with putting the effectiveness of Facebook advertising to the side, the marketing, branding, and consumer relations capabilities that Facebook provides are revolutionary.

So, while GM’s decision here might affect Facebook’s bottom line, it won’t change the broader cultural and business impact that Facebook has had.

All views here are my own and don’t reflect those of Attention or any of our clients.