"We regularly review our overall media spend and make adjustments as needed. This happens as a regular course of business and 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. 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."
The above statement was issued by General Motors today after a story by the Wall Street Journal was published online, in which GM chief marketing officer Joel Ewanick announced that the automaker will no longer advertise on Facebook — a bold announcement by one of the largest advertisers in the U.S.
The move will likely compel other big marketers to rethink their Facebook ad spending, even as Facebook moves to beef up its analytics dashboard for marketers by adding app ratings and negative feedback metrics to Facebook Insights. The vote of non-confidence couldn't come at a worse time for Facebook, which is trying to convince investors that the outlook for its advertising business justifies a potential IPO valuation of more than $100 billion.
GM's news that it's reassessing the value of Facebook ad spending comes as a key poll of Facebook users was released by Associated Press/CNBC. The survey, conducted by GfK Roper (download the full results here), found that 83 percent of Facebookers surveyed said they “hardly ever” or “never” click on Facebook ads, and more than half of them feel that Facebook is a "passing fad."
Part of that distrust, the pollsters heard, stemmed from concerns about privacy and the site's handling of user-created content, with three in five users surveyed saying they have little or no faith that the company will protect their data. Only 13 percent trust Facebook to guard their data; only 12 percent would feel safe making purchases through the site. Another new report (by BIA/Kelsey) projects social media ad spending to jump to $9.8 billion by 2016, an increase attributed not to higher ad spending on Facebook, but to higher spending on LinkedIn and on social video (driven by YouTube).
Despite the lure of more than 900 million registered Facebook users, Ewanick and his marketing analysts aren't convinced they're seeing the return on investment for buying display ads or "sponsored stories" on the site. They also posted a message yesterday on GM's Facebook page asking users to take a survey to help improve the brand's engagement and community on the site.
GM — the third-biggest U.S. advertiser after P&G and AT&T — will continue to use Facebook to promote its campaigns and car models. GM just won't continue buying ads on Facebook, which WSJ estimates cost the automaker about $10 million last year — still only "a fraction of GM's total 2011 U.S. ad spending of $1.8 billion, according to Kantar Media," the article points out.
Ewanick, who's been restructuring GM's marketing operations and spending "to cut billions of dollars costs" as the Journal puts it, is quoted as saying he "is definitely reassessing our advertising on Facebook, although the content is effective and important." The 'free' social content that GM promotes on Facebook costs an estimated $30 million for creative and "agencies that manage the content and daily maintenance of GM's pages, people familiar with the figures" told the WSJ.
The article also asserts that "the U.S. division of Kia Motors Corp. questioned the value of Facebook ads, saying it was unclear how paid ads help sell cars. However, the South Korean auto maker said it still planned on increasing its ad spending on Facebook this year."
Subaru of America CMO Dean Evans, however, commented to the Journal: "We have committed to Facebook for more than $5 million [in ad spending] this year and if the return on investment is there we will spend more next year. Half the U.S. population is on Facebook, you have to work it to learn it."
"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," wrote Nate Elliott, an analyst at market research firm Forrester, in a blog post titled "Facebook needs to take marketing seriously." (The co-authored post begins: "The world’s biggest social network will complete its initial public offering in a few days, with a valuation based largely on its strong history of innovation. But we have to wonder: Will Facebook ever focus any of that innovation on helping marketers?")
Keeping auto manufacturers happy "is critical for Facebook," the WSJ piece points out. "The auto industry is the largest pool of U.S. advertising dollars and often can make or break a marketplace. Automotive companies and car dealers shelled out $13.89 billion on U.S. ads across all media last year, according to Kantar."
"As long as Facebook is the bedrock of consumer engagement, advertisers can't ignore it," commented Craig Atkinson, chief digital officer of Omnicom's PHD, to WSJ. Facebook has to prove, he added, that "they can convert that fan engagement into a business outcome for marketers… It's about giving the finance people, who are cutting the checks, proof that its ad products work."
The article also cites Facebook's own statistics such as the statement (from March) "that only 16% of a brand's fans will see a post about the brand without paying. If the brand pays Facebook a fee per ad, Facebook will use technology to ensure that the ad is seen by 75% of those who click a company's "like" button on its website." Still, Facebook can't use technology to convince advertisers it's a good investment — or consumers to trust their data is in good hands. As for investors, we'll know how they're feeling shortly.
[Update: GM Reassures Facebook Fans as Rival Automakers Weigh In]