General Motors’ decision to pull its ads from Facebook – just days before the social network giant’s estimated $104bn (£65bn) IPO – has triggered doubts over the viability of its advertising model.
The car giant claims Facebook ads do not produce car sales, despite its $10m adspend, although it will continue to operate its Facebook page, which the company said it still finds useful.
GM is only the latest company to question whether Facebook, despite its 900 million users, is an effective use of advertising budget.
Last year, Facebook pulled in $3.7bn in revenue, meaning GM’s decision is just a drop in the ocean – even though Kia Motors has expressed similar reservations about the site.
But some analysts claim it could trigger other businesses to question the site’s effectiveness.
Forrester analyst Nate Elliott said: “Companies in industries from consumer electronics to financial services tell us they’re no longer sure Facebook is the best place to dedicate their social marketing budget – a shocking fact given the site’s dominance among users.”
And Pivotal Research Group Internet and media analyst Brian Wieser added: “This does highlight what we are arguing is the riskiness of the overall Facebook business model. It is not a sure thing. It looks likely that it will be one of the most important ad-supported media properties, but it’s not certain because there will be marketers who are challenged to prove the effectiveness of the marketing vehicle.”
