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Why Facebook should be scared with its Revenue Strategy

We all know the Facebook IPO is happening soon but some big news happened yesterday that, GM (the third largest advertiser in the US) pulled a $10 million dollar order because they figured out that Facebook ads don’t work.

Companies need to realize that when you offer a free marketing tool like their Facebook pages that you do not need to advertise much to attract an audience. You can gain fans simply by offering great content or a nice promotion or coupon.

GM has confirmed a report by the Wall Street Journalclaiming that the auto maker’s executives determined paid ads on Facebook had little impact on consumers’ car purchases.

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“We regularly review our overall media spend and make adjustments 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,” GM 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.

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Honestly, does anyone click on Facebook ads?

On a page that I run, I rarely see any topical ads (like Google Adsense). They are not appropriate to the page I am visiting and Facebook should be concerned in advance of their IPO.

One reason Google makes more revenue than Facebook is that people are actively looking for something (i.e. barber in Toronto, eco-friendly water bottle), on Facebook it is more about the social experience and not looking for anything.

5 thoughts on “Why Facebook should be scared with its Revenue Strategy”

  1. I wouldn’t be surprised if GM partly did this because they knew the media exposure it would produce, especially with all the hype of the Facebook IPO. Facebook advertising probably isn’t very worthwhile for big companies like that with no clear cut demographics. It still is quite useful for certain advertisers. Maybe Facebook finally went public because they wanted to cash out before things started to go into decline. It certainly is tougher to monetize random photos and comments rather than very specific keyword searches.

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