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Tuesday, May 22, 2012

GM quits advertising on Facebook

Yesterday (22nd May) Facebook shares dropped 11% in value. What should we read into this? Not much.


The fact that GM has stopped using the site for advertising is probably more important.


Rumours have it that GM spent only about $10 million last year to advertise on Facebook, that is a fraction of GM's total 2011 U.S. ad spending of $1.8 billion, according to Kantar Media. It is also a tiny share of Facebook's total 2011 revenue of $3.7 billion, most of which was advertising sales.


However.


An analyst with Forrester commented about this development: "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." 


If you believe this article in Technology Review then all is not well with the Facebook business model.

Coming back to GM's decision and looking how this relates to the older consumer. When I was recently in the US there was much debate that young people aren't bothering with cars. Either they cannot afford them or they prefer to live in big cities, have a bike and use public transport. I know, I know - a gross simplification.

We do know that well over half of all new cars are purchased by the 50-plus so maybe GM looked at the level of engagement that this group have with Facebook and decided the advertising money would be better spent on TV. Seems logical. 

For Facebook's sake let's hope that GM is an isolated incidence. Dick Stroud

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