General Motors shocked Wall Street and sent waves through the social media world when they announced to pull their $10 million Facebook advertising account just days before Facebook’s historic stock offering in May of 2013. Now, less than 1 year after publicly concluding that Facebook paid ads don’t work, the automaker has returned to advertising on the site.
The day GM announced they were pulling their Facebook ad campaign, I happened to be in a webinar with Scott Monty, head of social media at Ford, who responded to the situation by explaining Ford’s plan of increasing their Facebook marketing (rather than following GM’s lead and slowing it). Less than a year later, Ford has seen success with Facebook marketing/advertising, and GM wants back in the game. Despite Ford’s success, we found GM’s return to Facebook advertising a bit surprising. Therefore, we pulled this blog post from our vault to give some background on the situation (and some insight as to what other automakers are saying about Facebook ads):
Written Wednesday, May 23rd, 2013:
Yesterday, General Motors shocked Wall Street and sent waves through the social media world when they announced to pull their $10 million Facebook advertising account just days before Facebook’s historic stock offering. General Motors warranted their decision to stop advertising on the social media site by concluding that Facebook’s paid ads don’t have a large impact on consumers.
The irony lies in the fact that Facebook executives have spent the last few weeks attempting to convince investors that its advertising business makes the social network worthy of a sky-high valuation. Thus the move by GM, one of the largest advertisers in the U.S., spotlights an issue that has already been raised by many other marketers: whether advertising on Facebook actually helps sell more products.
While General Motors is consolidating its marketing budget, their main competitor, Ford, actually plans to expand its Facebook marketing efforts. Yesterday, not long after General Motors made this announcement, I was in a webinar with Scott Monty, head of social media at Ford, who responded to the situation by saying:
“It all comes down to execution. We’ve found Facebook ads to be very effective when we’ve strategically combined them with great content, engagement, and innovative ways of storytelling – rather than treating them as a straight media buy. And with over 10 million fans globally, Ford’s commitment to Facebook is clear, and not only are we are not slowing our span with Facebook – we are actually growing it. We are accelerating our efforts in Facebook over the course of the next year. So, it really is, for us, down to authentic storytelling and engagement wrapped with amplification so that we actually really do get a greater effect and a greater use for our marketing dollars.”
Ford isn’t the only auto maker that’s confident about Facebook’s value as an ad outlet. Dean Evans, Chief marketing officer of Subaru of America said that the company has committed more than $5 million in ad spending this year and, if the return on investment is there, will spend even more next year.
“Half the U.S. population is on Facebook, you have to work it to learn it,” says Mr. Evans.
However, while Ford and Subaru seem content with their Facebook marketing endeavors, GM isn’t the only auto maker that’s not entirely convinced. Earlier this month, a top marketing executive from the U.S. division of Kia Motors also questioned the value of Facebook ads, saying it was unclear how paid ads help sell cars.
“Companies in industries from consumer electronics to financial services tell us they’re no longer sure Facebook is the best place to dedicate their social marketing budget—a shocking fact given the site’s dominance among users,” said Nate Elliott, an analyst at market research firm Forrester, in a company blog post on Monday.
Regardless, keeping auto manufacturers engaged is pivotal for Facebook, as the auto industry is the largest pool of US advertising dollars and can often make or break a marketplace. Automotive companies and car dealers shelled out $13.89 billion on U.S. ads across all media last year, according to Kantar.
GM will continue to promote its product on Facebook, but without paying the social media company. Though GM only spent a fraction of its total 2011 ad spending of $1.8 billion, the $10 million GM forked over for Facebook advertising was only a tiny share of the site’s total 2011 revenue of $3.7 billion (most of which was in advertising sales).
However, Facebook discourages excluding ads from a Facebook marketing strategy (shocker), because only 16% of a brand’s fans will see a post about the brand without paying. If the brand pays Facebook a fee per ad, Facebook will use technology to ensure that the ad is seen by 75% of those who click a company’s “like” button on its website.
While speculation around Facebook ads will continue throughout the auto industry and marketing world, the question at hand remains: how will this news effect Facebook’s $105 billion IPO that’s scheduled for this Friday? Rick Summer, an analyst at equity researcher Morningstar Inc., rated Facebook at a “hold” at $32 a share with a $96 billion valuation, saying that it will take Facebook a very long time to build up its advertising business in a way that can justify its lofty valuation.