Just before Facebook’s IPO, G.M. Stirs Advertising Debate
A pulled $10 million advertising account may not be substantial in itself financially for Facebook, a company which reported a $3.7 billion revenue in 2011, but it may signal a troubling trend, industry analysts said Wednesday.
Tuesday’s announcement from General Motors, which said that its Facebook ads were underperforming, is awkward timing for the social media giant, which is seeking to alleviate doubt in its business model in preparation for its IPO, expected for Friday.
Analysts note Facebook’s dependence on ads may be a risk — even more so now that usage of Facebook’s mobile application is rising, one place that does not serve ads at all.
The concern is that GM, third largest spender in advertising in the country, could lead a diaspora of advertisers away from Facebook. Or just as easily, this may be a fluke, a case of a major company not understanding how to best market itself on the leading social network. In other words, is the problem GM’s cars or Facebook’s ads?
Content marketers often look to big, well-tooled companies for guidance on best practices, but in this case, most industry sentiment suggests GM is merely “doing it wrong.”
A comparison of Facebook ads with Google’s suggests GM’s move may have some merit. A study from Wordstream shows the average click-through rate of a Google ad is almost 10 times as high as the typical Facebook ad.
Other advertisers on the fence will be happy to know they are not the only ones disappointed with results from Facebook ads, Melissa Parrish, Forrester analyst told the New York Times. But the result may be that Facebook just steps up its game in catering to marketers’ needs.
Just over two weeks ago, the sentiment from marketers was a desire for more Facebook ads. “They’re very focused on the consumer experience, and less focused on revenue and working with advertisers,” Mike Parker of global ad agency Tribal DDB told CNET. Although he noted a need for better analytics, as Facebook is less willing to share user activity and ad metrics than Google or Yahoo, something Facebook said it plans to improve.
Other automakers note that measuring success in Facebook ads is different than for a traditional media buy. When companies simply “throw money” at social networking sites, they’re not likely to get the results they want, explained Jason Beckerman, chief strategy officer for United, who has worked for Facebook.
Big companies can get value out of social networks, but looking at brand penetration or recognition for ROI rather than straight sales is a better measure.
After the GM announcement, Ford very publicly proclaimed its continued support for both paid and inbound Facebook marketing.
“We’ve found Facebook ads to be very effective when strategically combined with engagement, great content and innovative ways of storytelling, rather than treating them as a straight media buy,” Ford said in a statement.
GM does plan to continue marketing efforts on its Facebook pages, which made up $30 million of its $40 million annual Facebook marketing spending.
But as Michael Scissons, president-CEO of Syncapse points out on AdAge, great content spreads faster with paid advertising.
Facebook’s own skepticism in banner-style ads is clear by its recent experiments with new paid ad products, including sponsored stories and Reach Generator. The latter assists brands with exposure to posts — increasing reach to 75 percent of fans, and capitalizes on what Facebook does best: mini-narratives and interaction with top customers.
“You need to have a credible presence and be doing innovative things.” Ford spokesman Scott Monty told Reuters, emphasizing the need to make use of paid and non-paid opportunities.
More than 20 percent of Ford’s marketing budget is spent on digital and social media.
In keeping with its “move fast and break things” mantra, marketers can expect Facebook to continue iterating on paid advertising offerings. Facebook will keep marketers on their toes with new products, but GM’s lead may prove marketers have power to keep Facebook on its toes, too.