GM pulls paid ads from Facebook

Just days before its IPO, Facebook’s had a big blow: General Motors has decided to pull all of its paid advertising, saying it’s just not cost-effective.

According to the Wall Street Journal, GM has been reviewing the effectiveness of its Facebook strategy since early this year. And while it’s decided that it’s worth keeping a presence on Facebook through its own pages, it says it’s going to pull all its paid advertising.

“Executives determined their paid ads had little impact on consumers,” it says.

It currently spends about $40 million per year on Facebook advertising, says the WSJ, or which Facebook itself gets about $10 million.

Even for Facebook, this is a lot of money: GM has been one of the company’s biggest advertisers in the past. Facebook made around $872 million from advertising during the first quarter of this year, out of total revenues of $1.06 billion.

And with the IPO looming, it’s a public relations disaster. Most investors are attracted by the idea that Facebook’s going to be drawing in more advertising in future, not less. The danger is that other big advertisers will follow suit.

“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,” says Forrester analyst Melissa Parrish.

“The reason, of course, is that Facebook just doesn’t pay nearly as much attention to marketing as it does to user experience.”

Parrish says that one global consumer goods company told Forrester recently that Facebook was getting worse, rather than better, at helping marketers succeed.

“We wish we could predict this IPO would serve as a new beginning for Facebook’s marketing offering, and that a new focus on becoming a grown-up business would inspire the company to put even half the energy into serving advertisers that it does into serving users,” she says.

“But we doubt Zuckerberg’s going to wake up any day soon having acquired a taste for advertising, or even a proper understanding of it.”