General Motors caused a tremor last month when it pulled its paid banner ads from Facebook. Because the timing of the news was so close to the social networking site’s IPO, there wasn’t much talk about what the world’s largest automaker’s decision might signal about the effectiveness of ads on social media as a whole, or whether other brands are likely to reconsider their social spends.
But with Facebook’s stock hitting an all-time low yesterday (it closed at US$ 26.90, the lowest price since the stock began trading at US$ 38 on May 18), some say the tremor has turned into a full-blown earthquake. It comes as a shock to many that petabytes of big, personal data don’t easily translate to dollars.
A Reuters survey released today reveals that 4 out of 5 Facebook users have never bought a product or service as a result of advertising or comments on the social network site.
What does this say about social media being a choice destination for advertisers and stakeholders?
From Facebook to Stadiums
“Investors are already scrambling out of related stocks, including social game company Zynga; the so-called "Facebook of China" RenRen; and Internet radio company Pandora,” writes USA Today reporter Matt Krantz.
Last week GM, which also happens to be the world’s third largest advertiser, penned a new ad deal not with Zynga, Twitter, Pinterest or Linkedin, but with Manchester United soccer team. Chevrolet's bowtie logo will now appear on Man U's team benches and in its stadium. It’s an advertising strategy that dates back more than a century.
Can pre-digital really be the best way for GM to spend its dollars in order to build relationships with the inhabitants of a socially networked, Web 2.0, mobile world?
The flabbergasting answer, especially if we’re talking about paying for ads and not getting results on Facebook as the alternative, is yes (Note: GM has also announced that it will no longer be sponsoring Super Bowl ads for much the same reason -- not enough bang for the buck. Some attribute the Man U move to that).
In a recent blog post, Forrester Research Analyst Nate Elliott wrote:
Somehow Facebook still hasn’t stumbled upon a model that’s proven consistently successful for marketers, or that brings in the massive revenues to match the site’s massive user base. One global consumer goods company told us recently that Facebook was getting worse, rather than better, at helping marketers succeed. And 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.”