* GM to keep pages on social networking site
* Automaker spent $1.1 bln on US ads last year -research
* Move seen as first highly visible crack in Facebook ad
* Facebook stock to debut Friday; valuation could exceed
By Ben Klayman and Alexei Oreskovic
DETROIT/SAN FRANCISCO, May 15 General Motors Co
said on Tuesday it will stop advertising on Facebook,
even as the social networking website prepares to go public.
While GM gave no specific reason for dropping Facebook ads,
a source familiar with the automaker's plans said the company's
marketing executives decided Facebook's ads had little impact on
While GM's decision could be an exception in the advertising
world, it marked the first highly visible crack in the Facebook
strategy, said Brian Wieser, Internet and media analyst at
Pivotal Research Group.
"This does highlight what we are arguing is the riskiness of
the overall Facebook business model," he said. "It is not a sure
thing. It sure 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."
Facebook Inc, founded eight years ago by Mark
Zuckerberg in a Harvard dorm room, is expected to start trading
on the Nasdaq on Friday. The world's No. 1 social networking
site raised its IPO price range on Tuesday, potentially giving
the company a valuation of more than $100 billion.
An executive at another large consumer products company said
the issue with advertising on Facebook is nobody really knows
yet if it works better than traditional media and is worth the
money spent. "Is it just a shiny new object, or is it a real
value proposition?" said the executive, who asked not to be
GM said it will still have Facebook pages, which cost
nothing to create, to market its vehicles. GM pays no fee to
Facebook for its pages, which allow the automaker to reach
GM said it regularly reviews how it spends its marketing
budget and adjusts its approach as needed.
"It's not unusual for us to move our spending around various
media outlets - especially with the growth of multiple social
and digital media outlets," the company said in a statement.
"In terms of Facebook specifically, while we currently do
not plan to continue with advertising, we remain committed to an
aggressive content strategy through all of our products and
brands, as it continues to be a very effective tool for engaging
with our customers," GM said.
NO. 3 U.S. ADVERTISER
GM spends about $40 million on its Facebook presence, but
only about $10 million of that is paid to Facebook for
advertising, according to the Wall Street Journal, which first
reported GM's plans to drop Facebook ads. The remaining budget
covers the creation of content and the advertising and media
agencies involved, the newspaper said.
GM, the country's third-largest advertiser behind Procter &
Gamble Co and AT&T Inc, spent $1.11 billion on U.S.
ads last year, according to Kantar Media, an ad-tracking firm
owned by WPP Plc. About $271 million of the total GM
spent for ads last year was for online display and search ads
excluding Facebook advertising.
Facebook ads make up a small percentage of GM's advertising
budget, but the company said it is committed to the website to
market its vehicles.
For instance, the Facebook page for the Chevrolet Sonic
small car as of 2000 GMT on Tuesday had more than 423,000
"likes." The first three months of Sonic's marketing campaign
which began last October were exclusively digital, with TV ads
not running until early this year.
REACHING YOUNGER CONSUMERS
While GM rival Ford Motor Co said it was committed to
advertising on Facebook, the social media site is just one part
of the No. 2 U.S. automaker's marketing strategy. Ford also is
boosting its spending on Facebook, including ad buys.
"You just can't buy your way into Facebook," said Ford
spokesman Scott Monty. "You need to have a credible presence and
be doing innovative things."
More than 20 percent of Ford's marketing budget is spent on
digital and social media, he said. The company launched its 2011
Explorer SUV on Facebook and other digital outlets for a
fraction of the cost of a Super Bowl TV spot, which cost $3.5
million on average per 30 seconds this year.
Automakers are increasingly turning to social media sites
to reach younger consumers on their turf for less than a tenth
of the cost of a traditional marketing campaign.
Ford first used social media on a wide scale to promote the
Fiesta small car in 2009 in a campaign dubbed the "Fiesta
Movement." It spent $5 million on the campaign for the car,
which was returning to the U.S. market after roughly three
After the Fiesta campaign, Ford said 60 percent of Americans
who said they would buy a small car within two years said they
were familiar with the Fiesta. That kind of recognition would
cost $100 million through traditional means, the company said.
Another fan of Facebook is Japanese automaker Subaru
, which started using banner ads at the website in the
past year in addition to its free content. "Advertising plus
content equals more clicks to our website, which we like,"
Subaru spokesman Michael McHale said.
Most of Facebook's corporate clients, like Ford, are
satisfied with the return they get from their ads, said Jason
Beckerman, chief strategy officer for Unified, which helps
companies analyze the impact of marketing campaigns on social
networking sites. In addition to Ford, clients at his firm
include German automaker BMW, P&G and Microsoft Corp
Beckerman, who has worked with Facebook in the past, said
companies tend to be dissatisfied when they simply "throw money"
at social networking sites. "Without the proper planning and
structure of your buys, you are asking for little to no