GM to Facebook: Your ads don’t work (but our content marketing does)

The Wall Street Journal is reporting, in a three-person bylined story, that GM plans to stop advertising on Facebook after its senior marketing executives decided “that paid ads on the site have little impact on consumers’ car purchases.” However, while the company won’t pay for advertising on the site, they plan on continuing their content marketing activities on Facebook.

Here are the bullet points:

  • GM paid $10 million to Facebook for advertising during the past year.
  • GM paid agencies and others (companies other than Facebook) $30 million for the creation of content and the management of marketing activities on GM’s pages on Facebook
  • Facebook provides those pages to GM for free, the same price you or I pay.
  • Just to make sure you’re following this, let me repeat this another way:  GM paid 3x their Facebook advertising budget for creating the content (articles, videos, promotions, status updates, etc.) that appears on Facebook pages that are “free” to any marketer.
  • GM thinks the $10 million spent on Facebook advertising is wasted, so they are pulling it.
  • GM thinks it’s still worth $30 million to create and manage content on Facebook.

As you might expect, those of us at Hammock who spend time trying to explain the value of using “content” in addition to (or, in some cases, rather than) traditional types of advertising (including traditional internet advertising) to build deeper, longterm relationships with customers, find this kind of news a validation of things we’ve been saying since Mark Zuckerberg was in elementary school.

But that’s not why this is news.

It’s news because Facebook’s IPO is expected to occur in three days and the reported pricing of the IPO (when compared to the Price/Earning ratios of companies like Apple) suggests that Facebook has the potential of soon being able to, “attract 10 percent of all advertising dollars spent on the planet ‘across all media – print, billboards, radio, television, internet,” according to a Dartmouth professor quoted in an NPR story earlier today.

So here’s the rub:

If GM, the third largest advertiser in the U.S., with an overall annual advertising budget of $1.8 billion, finds that spending .05 percent of its budget is too much, what chance does Facebook have of capturing 10 percent of GM’s total advertising budget in a few years? And what chance does it have of capturing 10 percent of all advertising?

Hint: The answer is 0 percent.

But I’ve not written this post to bury Facebook, but to praise it. What they’ve done is incredible: the creation of a platform that causes a company like GM to spend $30 million in creating content just for it is miraculous — probably right up there with how much GM spends on paying lawyers and PR professionals to issue press releases each year.

The IPO price of Facebook is probably ridiculous, and that might fail. But Facebook is a success. Just like Yahoo! was in 1999.

Later: There’s always more than one side to a story. AllThingsD’s Peter Kafka says GM was never a big believer in social media, anyway.