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On the eve of Facebook’s historic IPO announcement, General Motors announced that it will pull all funding from advertisements displayed on Facebook. According to General Motors, they feel that paid ads through Facebook have little impact on consumers’ vehicle purchases, rendering them unnecessary costs. So what does this mean for the future of paid ads through social media? If rendered ineffective by other major corporations, where will the money come from for the social media giants? Is this the end of social media marketing as we know it?
Short Answer: Not a chance. Many other large automakers see great value in advertising through Facebook. However, it is easy to understand why the effectiveness ads on Facebook continue to come into question, as they have in the past. Important metrics that measure the effectiveness of advertisements are significantly poorer on Facebook than on the results pages of search engines like Google and Bing. The user intent is typically much different on a search engine, where users are often searching for a product or service to buy, whereas the users on a social media platform, like Facebook, are typically not searching for products or services to purchase online. This generally leads to lower click through rates for the ads and higher costs per conversion for the campaigns as a whole.
So what makes Facebook ads appealing to advertisers? The plethora of information Facebook gathers from its users is immense and is extremely valuable for any advertiser looking to target a very specific demographic, which is something Google, in a way, has tried to replicate. Many businesses have also found that Facebook ads, when managed properly, can be quite effective for getting a message across, like an upcoming event or product release, or simply for building brand awareness. They become more effective when targeting a specific demographic niche that cannot be reached through traditional means of advertising, and for products that are not necessarily purchased online.
GM’s drop of Facebook ads is more of a statement than an actual financial concern for Facebook, and GM won’t be leaving the Facebook world anytime soon. Last year, GM spent about $10 million on Facebook ads last year and $30 million elsewhere on Facebook, which is small change when measured against their overall ad spend of $1.8 billion. Other motor leaders like Ford and Nissan continue to believe in Facebook ads, and have stated that they won’t sell any cars over Facebook, but the brand awareness gained is worth the money spent.