Wednesday, May 16, 2012

GM vs Ford and the Facebook IPO debate

If you are in the marketing world the announcement that GM is canceling it's $10 million in Facebook ads just before the coming IPO was big news. And Ford it's main competitor seemed to have some tongue and cheek words on the Twitter followed by this Forbes article. They say they believe in Facebook.

Who is right? It depends on what you think Facebook is. In the Forbes article Ford clearly does not view Facebook as a paid advertising site. They look at it more for the social interactions on Brands Pages in conjunction with Paid ads and an integrated non-social media marketing effort. 

GM feels the value is in direct advertising and they aren't getting the response rates. Others also have experienced this.

I have three views on this. Because they both are right.

1] Facebook is not driving car sales. It will never drive car sales. But advertising there and having Brand pages to get feedback as mini-focus groups like Ford is using them is a worthwhile part of your marketing mix. I am ok with brands not being on Facebook,. Facebook surely doesn't give you the ability to listen off your page. So it is probably 100% likely that 95% of the chatter going on about your Brand on Facebook you will never see or hear. But that 5% that is on your page can be valuable for sure.

2] Facebook has an upcoming IPO. They are selling themselves to investors as a giant paid advertising network no different than Yahoo. Yet their ads perform worse than Yahoo's. And they aren't elegant banner ads but little Craig's List worthy Ads. And GM decided why spend money on these ads because they perform poorly. And thus place that money elsewhere with higher impact.

This is the problem with the IPO. Facebook is a Social Sharing Network it is not a Paid Advertising Network. But the revenue is in Paid. Ford finds value in the first and GM wants the second.

3] But should GM of pulled the ad spend? Depends. Facebook to their credit charges only if you get a click. If I pay for 200 clicks and it takes Facebook 1 million ad impressions to get me that who cares? That is their problem not mine. As long as I can get my 200 clicks is all I care about. So no GM should not of pulled them unless that was near and dear money they knew would have a higher return. BUT tell me GM isn't wasting half their ad spend just like Ford does? What is $10m to them?

Lastly as an investor I would be really worried that a major Brand like GM is pulling money from Facebook when they are selling themselves as a paid advertising network. The reason there is hype is because they keep booking more and more ads even while the performance in terms of click through rate being really poor. Right now everyone is testing how they work. But if they decide ads work better elsewhere their goes their revenue.


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  2. I think you are going to see certain companies have great success on Facebook and certain companies that aren't performing as well. I wonder how well Google Ads work for GM. I know I would never click a GM ad mid-Google search, but I'm not everyone.

    You never know what will happen on the market... but I am betting on Facebook.

    I can see your case though, and you have made it very respectably. Facebook is not naturally a paid service. That's an important point that I have not heard kicked around quite as much as the "Facebook will decline and something will replace it" line.

    Good piece.