GM to Drop Facebook Advertising Before IPO

GM Says Facebook Ads Don't Pay Off

Staff Report

DETROIT, MI - According to a GM official, General Motors Co. plans to stop advertising with Facebook. They have decided that paid advertising on the social network have little impact on consumers' car purchases.

While the $10 million GM was spending with Facebook is just a small percentage of their overall revenue, the move shows that some marketers are questioning whether there is truly value with Facebook advertising. And this may be part of why some people around the world are questioning the valuation of Facebook.

Robert Hof at Forbes wrote:

One of the leading brand advertisers in the world thinks advertising on Facebook doesn’t work. And while marketers have voiced such uncertainties for some time, both in the Wall Street Journal recently and earlier in Forbes stories and posts, the exit of an iconic advertiser like an automaker is particularly worrisome.

On this Friday, Facebook will most likely sell FB shares in an initial public offering that could put a market value on them as high as $104 billion. Facebook executives have spent several weeks trying to convince investors that its advertising business makes it worthy of a sky-high valuation.

At the same time, others are saying that the Facebook valuation may be too high - a sign of another Dot Com Crash. While whether Facebook is worthy of the valuation they are getting remains to be seen in the months and years ahead, the fact that large advertisers like GM are pulling out may not be a good sign.

Facebook had $3.7 Billion in revenue in 2011. GM is not the only company questioning the effectiveness of advertising on Facebook. In fact, earlier this month, a marketing executive from the U.S. division of Kia Motors Corp. questioned the value of Facebook ads, wondering how the paid ads helped sell cars