GM plans to pull the plug on paid ads on Facebook

MUMBAI: Leading global automobile manufacturer General Motors plans to stop advertising with social networking website Facebook. The company feels that paid ads on the site have little impact on consumers‘ car purchases.

GM is the third-biggest advertiser across all media in the U.S, after Procter & Gamble and AT&T.

GM spends about $30 million on content created for the site which includes agencies that manage the content and daily maintenance of GM‘s pages. The automobile giant began re-evaluating its Facebook strategy earlier this year after its marketing team began to question the effectiveness of the ad. Grapevine also has it that GM has been revamping its marketing, hiring a new ad firm to buy its media.

The move brings to light a much debated issue that many marketers have been raising: whether ads on Facebook help them sell more products. While GM plans to withdraw the paid ads, it intends to continue maintaining the free Facebook pages and promote its products on Facebook.

This move by GM also raises questions about Facebook’s ability to sustain the 88 per cent revenue growth achieved in 2011. Facebook said last month its first-quarter ad revenue was down 7.5 per cent from the previous three months and blamed ‘seasonal trends’ for the decline, as well as a greater number of users from outside the U.S., where ad rates are lower.

GM spent around $10 million (5.55 per cent) of its total ad spends in the US viz. $1.8 billion in 2011 , according to Kantar Media. This constitutes Facebook‘s 2.70 per cent of Facebook’s total 2011 revenue of $3.7 billion, most of which was advertising sales.

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