General Motors is going to start swimming against the stream. GM announced yesterday that they will be pulling all advertisements from Facebook even as Facebook prepares to go public. GM didn’t give a specific reason for pulling their ads however a source familiar with the company (maybe the CFO?) said that marketing executives decided that the advertisements have little effect with consumers on the social site. No one was clicking GMs $10 million worth of advertisements and with GM being fresh from the brink of collapse I guess they don’t want to waste money on lost causes. I wonder if they advertised on Google+? Those getting a Facebook paycheck fired right back saying that saying GM ran a lousy Facebook campaign and ignored the social network’s advice.
The problem that this will present for Facebook in the long run is they’re going to be heavily reliant on advertising to make money in the future. Selling all of your user data isn’t enough to sustain the site of over half a billion users. With Facebook preparing to go public and their IPO soaring to ridiculous levels GMs announcement isn’t going to directly hurt Facebook but at the first sign that Facebook isn’t performing the way marketing managers across the globe think it should be they might opt to follow GM. Ford and Chrysler have said they won’t be abandoning Facebook.
“Facebook advised [GM] to invest more wisely in a campaign that would reach more people,” this person said. Instead, though, GM put most of its money into the development of promotional apps and its corporate “page presence” on Facebook, and “didn’t see a response” as a result. “No one will know that stuff is there unless you use paid media to promote it,” the anonymous Facebook individual said.
General Motors spent around $40 million worth on Facebook with $10 million going to direct advertising and the rest going into things like app development, page development and other apparently useless crap. You’d think that with all of the hardcore Chevy only people out there that the advertisements would have some affect and maybe they do but GM doesn’t think it is having millions of dollars worth of impact. I can say that when I actually had a Facebook page that I never ever clicked an advertisement unless by accident and there are plenty more like me who use things like Firefox’s Ad Blocker Pro to make sure they don’t hit one by accident. Since a heavy focus on advertising is essentially Facebook’s only business model this could present a serious problem for them.
46% of people think Facebook is a fad
Almost half of Americans think that Facebook will go the way of Myspace. Do you even remember Myspace? I do and I also remember that when it was nearing its climax they also started focusing heavily on advertising. It went downhill very quickly. About 43% of Americans think that Facebook will do just fine over the long term and 11% didn’t know.
- Investors are more optimistic than others about the company’s long-term prospects. 48 percent think it will be successful in the long run compared with 42 percent of non-investors.
- There’s a sharp divide on this question among users and non-users of the site. Fifty-one percent of users see it as a long-term success versus just 35 percent among non-users.
- Although they are generally more positive about the company, younger adults are no more apt than their older counterparts to expect Facebook’s long-term success; 51 percent think it will fade.
Is Facebook going to implode tomorrow? No it probably isn’t unless Zuckerberg committed suicide and even that might not stop the IPO rise and the continual hyping of Facebook. The problem is that once Facebook becomes a publicly traded company we the people will be able to see how it performs thanks to its stock price. Most people don’t correlate stocks with how they use social networks but the point is if Facebook’s stock starts to tank, the investors are going to bail and then the company won’t be able to sustain the quality of the website. Like Myspace it will become slow, riddled with ads and eventually deserted if they cannot figure out a way for advertising to get users to click. I don’t think this is just a Facebook problem either. It is a social network problem and Facebook is about to find out if they have fixed it.
GM employs 202,000 people and does business in some 157 countries. General Motors produces cars and trucks in 31 countries, and sells and services these vehicles through the following divisions/brands: Buick, Cadillac, Chevrolet, GMC, Opel, Vauxhall, and Holden, as well as two joint ventures in China, Shanghai GM and SAIC-GM-Wuling Automobile. GM’s OnStar subsidiary provides vehicle safety, security and information services.
In 2009, the company emerged from a government backed Chapter 11 reorganizaiton. In 2010, GM made an initial public offering that was one of the world’s top 5 largest IPOs to date. GM has reported significant profits, posting a record annual profit in 2011.
Facebook was founded by Mark Zuckerberg with his college roommates and fellow students Eduardo Saverin, Dustin Moskovitz and Chris Hughes. The Web site’s membership was initially limited by the founders to Harvard students, but was expanded to other colleges in the Boston area, the Ivy League, and Stanford University. It gradually added support for students at various other universities before opening to high school students, and eventually to anyone aged 13 and over. However, according to a May 2011 Consumer Reports survey, there are 7.5 million children under 13 with accounts and 5 million under 10, violating the site’s terms of service.