Just ahead of the much-discussed Facebook IPO, General Motors announced that they plan to cease advertising on the social networking site. They will continue to market on Facebook through the free Facebook pages but will not be paying Facebook for ads.
Their reason is something that most ads executives have considered at one point or another when looking at Facebook: will it help sell more products? General Motors determined that it was not helping them sell more cars.
While their $10 million annual spend on Facebook was a tiny fraction of both their advertising spend ($1.8 billion) and Facebook’s 2011 revenue ($3.7 billion), it brings to light a concern ahead of the IPO about Facebook’s ability to continue to grow revenues. They blamed seasonal ad boosts in the 4th quarter of 2011 for their decline in the 1st quarter of 2012, but some are still skeptical. If Facebook is merely a channel for exposure, won’t properly-managed and marketed free Facebook pages themselves still accomplish the goal?
That’s the big question that advertisers (and potential investors) want answered sooner than later.
