Industry Reacts to GM’s Decision to Pull Facebook Ads

Decision ignores relationship between paid and earned media, say experts

When Nissan debuts its newest Altima model next month, it will be the automotive brand’s biggest digital spend ever. And, yes, part of that spend will be allocated to running ads on Facebook, including Sponsored Stories and possibly the use of Facebook's recently launched Reach Generator tool, which is designed to amplify messages on the site.

Normally that’s a non-story, but questions have long been swirling over the value of Facebook advertising and came to a head yesterday with the Wall Street Journal reporting that General Motors will stop running paid ads on Facebook. The news has puzzled many industry executives, including Nissan’s director of social media and interactive marketing Erich Marx.

“Admittedly we don’t do much [paid social advertising] outside those launch and reveal timeframes,” he said. “So strategically GM may not be that far off,” but dropping their Facebook ad spend to zero “seems a little bit of an overstatement.”

The Journal pegged GM’s Facebook budget at $30 million spent on content such as page management and $10 million spent on ads. Nissan’s Facebook budget is smaller than those numbers, Marx said, but the split is even more heavily in favor of the content side. The reason behind Nissan’s content-heavy Facebook budget is that it limits use of Facebook ads to tentpole events like the launch of a new model in order to build awareness.

“It’s not about using Facebook advertising to get the sale of a car,” Marx said. “We’re not going to sell a car on Facebook, but we can certainly build awareness around it.”

Marx admitted that he hasn’t been tasked with tying Facebook ads to return on investment, instead focusing on the “high cost of ignoring the social space as a tool to communicate with fans and build brand awareness and familiarity.” But the Journal chalked up GM’s decision to questions over the effectiveness of Facebook ads.

Said Nissan’s Marx: “I don’t necessarily disagree with the decision to back off or to regauge the [Facebook marketing] mix, but to go to zero just seems maybe not something that we would ever do here at Nissan. The number’s not zero [but] it may not be $10 million either.”

While GM reiterated in a Facebook post on Wednesday that it will be running more content across its Facebook pages, Dave Williams, CEO of social ad firm Blinq Media, said not running ads could hurt the effectiveness of that content because paid ads influence Facebook’s EdgeRank algorithm, which determines how content posted to a page is distributed to its fans.

“It has a pretty significant impact on EdgeRank to the point where content distribution will spike as high as 60 even 80 percent of the audience.” That impact is particularly important considering that Facebook said earlier this year that users on average see only 16 percent of content in the News Feed.

The timing of GM’s news is interesting given that Facebook will be going public on Friday. Nissan’s Marx said as much, and he wasn’t alone on that point. Kurt Abrahamson, CEO of content sharing platform ShareThis, said the timing is the “most interesting thing.”

"I keep thinking, 'how does a major customer like that spring such a surprise on you in the most important week of your company?'” Abrahamson asked. GM did not immediately respond to a request for comment on the timing of the news.

Though the timing is curious, GM isn’t the first brand to question the effectiveness of Facebook advertising. Zach Newcomb, executive account director at Rokkan, said the GM news “speaks to the uncertainty [among brands] of quantifying the value of their Facebook fans or audience on Facebook.” And Daina Middleton, global CEO of Performics, said her clients aren’t thinking any differently because of the GM news but “they’re all asking themselves” how to best market through social media.

In fact, according to a survey conducted by Performics, things are not so dire for brands on the site. In fact, 30 percent of the 3,000 users surveyed claim to have clicked on an ad on Facebook at least once a week.

That's not to say that the symbolic statement made by GM is lost on the industry. Simon Mansell, CEO of social ad firm TBG Digital, said three clients—a financial services brand, an electronics brand and a cable TV brand—had reached out to him for feedback upon hearing the news. In response TBG has created a slide deck titled “Why GM will regret this,” in which the firm states that ads feature social context such as a friends’ names perform 30 percent better than those lacking social context.