A recent study for The Hollywood Reporter found that 88 percent of people consider Facebook to be entertainment, and a CNBC/Associated Press survey released just today confirmed this, finding that only 12 percent of users would feel confident making purchases through the site, so no one should be shocked that General Motors announced that it is yanking its advertising dollars ($10 million worth) from the social network’s platform.
The news was first reported via tweet by Dennis Berman of The Wall Street Journal.
Still, in light of Facebook’s initial public offering Friday (have these three words been branded into your brain yet?), the hit has got to sting.
The automaker cited the ineffectiveness of ads on the social network, but said it will proceed with its marketing campaigns on the brand’s Facebook pages, which the company will not have to pay Facebook to operate, according to the Journal.
GM spends a whopping $40 million per year on Facebook marketing, according to Business Insider’s Silicon Alley Insider, but only 25 percent of that total is directed to advertising, while 75 percent goes to content creation (is that the “engagement” hot-button whispering in our ears?).
GM’s Facebook expenditures are a mere fraction of the $1.8 billion the automaker spends globally per year on advertising.
The social network can’t afford to lose too many of its household brands because their ads are ineffective. If a domino effect were to start, that could spell trouble down the line. That’s because the bulk of the $3.7 billion posted in revenues in 2011 originated from advertising. As it is, revenues slipped in the first quarter of 2012 compared with the previous-year quarter.
Still, this reaction may only be expected since it is widely known that Facebook has to shift its energy to focus on how it can monetize mobile, perhaps leaving other advertising platforms behind. After all, mobile is the new PC.
Readers: What, if anything, does GM’s withdrawal mean for the approaching IPO, keeping in mind that a final price will not be set for Facebook shares until Thursday?